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An Investor Is Developing a Portfolio of Stocks σ\sigma i2 = Variance of Stock I

Question 9

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An investor is developing a portfolio of stocks. She has identified 3 stocks in which to invest. She wants to earn at least 5% return but with minimum risk. Let:
Pi = proportion of total funds invested in stock i
σ\sigma i2 = variance of stock i
σ\sigma ij = covariance between stocks i and j.Ri = average return on stock i
What is the objective function for the NLP formulation of this problem?


A) An investor is developing a portfolio of stocks. She has identified 3 stocks in which to invest. She wants to earn at least 5% return but with minimum risk. Let: P<sub>i </sub> = proportion of total funds invested in stock i \sigma <sub>i</sub><sup>2</sup> = variance of stock i \sigma <sub>ij</sub> = covariance between stocks i and j.R<sub>i</sub> = average return on stock i What is the objective function for the NLP formulation of this problem? A) B) C) D)
B) An investor is developing a portfolio of stocks. She has identified 3 stocks in which to invest. She wants to earn at least 5% return but with minimum risk. Let: P<sub>i </sub> = proportion of total funds invested in stock i \sigma <sub>i</sub><sup>2</sup> = variance of stock i \sigma <sub>ij</sub> = covariance between stocks i and j.R<sub>i</sub> = average return on stock i What is the objective function for the NLP formulation of this problem? A) B) C) D)
C) An investor is developing a portfolio of stocks. She has identified 3 stocks in which to invest. She wants to earn at least 5% return but with minimum risk. Let: P<sub>i </sub> = proportion of total funds invested in stock i \sigma <sub>i</sub><sup>2</sup> = variance of stock i \sigma <sub>ij</sub> = covariance between stocks i and j.R<sub>i</sub> = average return on stock i What is the objective function for the NLP formulation of this problem? A) B) C) D)
D) An investor is developing a portfolio of stocks. She has identified 3 stocks in which to invest. She wants to earn at least 5% return but with minimum risk. Let: P<sub>i </sub> = proportion of total funds invested in stock i \sigma <sub>i</sub><sup>2</sup> = variance of stock i \sigma <sub>ij</sub> = covariance between stocks i and j.R<sub>i</sub> = average return on stock i What is the objective function for the NLP formulation of this problem? A) B) C) D)

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