Computation efficient frontier for strategic decision
Calculate an Efficient Frontier
|
Stock
|
Mean Rate of Return
|
Standard Deviation
|
|
A
|
12%
|
6.00%
|
|
B
|
9%
|
4.00%
|
|
C
|
18%
|
12.00%
|
How?
-Pick y to be your investment in Stock A, where y goes from 0 to 1
-Increment size? Your choice. You can try 0.25 to start, ideally down to 0.01.
- Pick z to be your investment in Stock B, where z goes from 0 to 1 - y
- Therefore you invest (1 - y - z) in C
- Calculate for each y and z, your portfolio\'s return and standard deviation
Plot the graph of the resulting portfolio returns and standard deviations