Finance_SL3 by ClassOf1

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Sub: Finance                                                       Topic: Strategic Financing Decision

Question:

Calculating Efficient Frontier For Strategic Decision

Calculate an Efficient Frontier


              Mean Rate of Standard
Stock         Return                   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

                              www.classof1.com/homework-help/finance
 *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
                              submitting the same in lieu of their academic submissions for grades.
Sub: Finance                                                       Topic: Strategic Financing Decision

Solution :

Weight A Weight B Weight C Portfolio Return Portfolio Standard deviation
    0.29           0.64          0.07                  10.5%                                   3.21%
    0.29           0.65          0.06                  10.4%                                   3.21%
    0.29           0.63          0.08                  10.6%                                   3.21%
    0.29           0.66          0.05                  10.3%                                   3.21%
    0.29           0.62          0.09                  10.7%                                   3.22%
    0.29           0.67          0.04                  10.3%                                   3.23%
    0.29           0.61          0.10                  10.8%                                   3.23%
    0.29           0.68          0.03                  10.2%                                   3.24%
    0.29            0.6          0.11                  10.9%                                   3.25%
    0.29           0.69          0.02                  10.1%                                   3.26%
    0.29           0.59          0.12                  11.0%                                   3.28%
    0.21           0.75          0.04                  10.0%                                   3.28%
    0.21           0.75          0.05                  10.0%                                   3.28%
    0.22           0.74          0.04                  10.0%                                   3.28%
    0.20           0.75          0.05                  10.1%                                   3.28%
    0.22           0.74          0.03                  10.0%                                   3.28%
    0.19           0.75          0.06                  10.1%                                   3.29%
    0.23           0.74          0.03                  10.0%                                   3.29%
    0.29            0.7          0.01                  10.0%                                   3.29%
    0.19           0.75          0.06                  10.1%                                   3.29%
    0.23           0.74          0.03                   9.9%                                   3.29%
    0.18           0.75          0.06                  10.1%                                   3.30%

                              www.classof1.com/homework-help/finance
 *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
                              submitting the same in lieu of their academic submissions for grades.
Sub: Finance                                                       Topic: Strategic Financing Decision
    0.24           0.74          0.02                   9.9%                                   3.30%
    0.18           0.75          0.07                  10.1%                                   3.30%
    0.25           0.74          0.02                   9.9%                                   3.30%
    0.29           0.58          0.13                  11.1%                                   3.30%
    0.17           0.76          0.07                  10.2%                                   3.31%
    0.25           0.74          0.01                   9.9%                                   3.31%
    0.29           0.71          0.00                   9.9%                                   3.32%
    0.17           0.76          0.08                  10.2%                                   3.32%
    0.26           0.73          0.01                   9.8%                                   3.32%
    0.16           0.76          0.08                  10.2%                                   3.33%
    0.26           0.73          0.00                   9.8%                                   3.33%
    0.28           0.72          0.00                   9.8%                                   3.33%
    0.29           0.57          0.14                  11.2%                                   3.34%
    0.15           0.76          0.09                  10.2%                                   3.34%
    0.27           0.73          0.00                   9.8%                                   3.34%
    0.15           0.76          0.09                  10.3%                                   3.35%
    0.27           0.73          0.00                   9.8%                                   3.35%
    0.14           0.76          0.09                  10.3%                                   3.37%
    0.29           0.56          0.15                  11.2%                                   3.37%
    0.14           0.76          0.10                  10.3%                                   3.38%
    0.13           0.77          0.10                  10.3%                                   3.40%
    0.13           0.77          0.11                  10.3%                                   3.41%
    0.29           0.55          0.16                  11.3%                                   3.42%
    0.12           0.77          0.11                  10.4%                                   3.43%


                              www.classof1.com/homework-help/finance
 *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
                              submitting the same in lieu of their academic submissions for grades.
Sub: Finance                                                       Topic: Strategic Financing Decision
    0.11           0.77          0.12                  10.4%                                   3.45%
    0.29           0.54          0.17                  11.4%                                   3.46%
    0.11           0.77          0.12                  10.4%                                   3.47%
    0.10           0.77          0.12                  10.4%                                   3.49%
    0.10           0.77          0.13                  10.4%                                   3.51%
    0.29           0.53          0.18                  11.5%                                   3.51%
    0.09           0.78          0.13                  10.5%                                   3.53%
    0.09           0.78          0.14                  10.5%                                   3.55%
    0.29           0.52          0.19                  11.6%                                   3.56%
    0.08           0.78          0.14                  10.5%                                   3.58%
    0.07           0.78          0.15                  10.5%                                   3.60%
    0.29           0.51          0.20                  11.7%                                   3.62%
    0.07           0.78          0.15                  10.6%                                   3.63%
    0.06           0.78          0.15                  10.6%                                   3.66%
    0.06           0.78          0.16                  10.6%                                   3.69%
    0.05           0.79          0.16                  10.6%                                   3.71%
    0.05           0.79          0.17                  10.6%                                   3.74%
    0.04           0.79          0.17                  10.7%                                   3.77%
    0.00           0.90          0.10                   9.9%                                   3.79%
    0.00           0.89          0.11                  10.0%                                   3.80%
    0.00           0.91          0.09                   9.8%                                   3.80%
    0.00           0.88          0.12                  10.1%                                   3.80%
    0.03           0.79          0.18                  10.7%                                   3.80%
    0.00           0.92          0.08                   9.7%                                   3.81%


                              www.classof1.com/homework-help/finance
 *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
                              submitting the same in lieu of their academic submissions for grades.
Sub: Finance                                                       Topic: Strategic Financing Decision
    0.00           0.87          0.13                  10.2%                                   3.82%
    0.00           0.94          0.06                   9.6%                                   3.82%
    0.00           0.86          0.14                  10.3%                                   3.84%
    0.03           0.79          0.18                  10.7%                                   3.84%
    0.00           0.95          0.05                   9.5%                                   3.84%
    0.00           0.84          0.16                  10.4%                                   3.86%
    0.00           0.96          0.04                   9.4%                                   3.87%
    0.02           0.79          0.18                  10.7%                                   3.87%
    0.00           0.83          0.17                  10.5%                                   3.89%
    0.00           0.97          0.03                   9.3%                                   3.90%
    0.02           0.79          0.19                  10.7%                                   3.90%
    0.00           0.82          0.18                  10.6%                                   3.92%
    0.00           0.98          0.02                   9.2%                                   3.93%
    0.01           0.80          0.19                  10.8%                                   3.94%
    0.00           0.81          0.19                  10.7%                                   3.96%
    0.01           0.80          0.20                  10.8%                                   3.97%
    0.00           0.99          0.01                   9.1%                                   3.97%
    0.00           0.80          0.20                  10.8%                                   4.01%
    0.00           1.00          0.00                   9.0%                                   4.02%
      0.8              0           0.2                 13.2%                                   5.37%
    0.79               0         0.21                  13.3%                                   5.37%
    0.81               0         0.19                  13.1%                                   5.37%
    0.78               0         0.22                  13.3%                                   5.37%
    0.82               0         0.18                  13.1%                                   5.37%


                              www.classof1.com/homework-help/finance
 *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
                              submitting the same in lieu of their academic submissions for grades.
Sub: Finance                                                       Topic: Strategic Financing Decision
    0.77               0         0.23                  13.4%                                   5.38%
    0.83               0         0.17                  13.0%                                   5.38%
    0.84               0         0.16                  13.0%                                   5.39%
    0.76               0         0.24                  13.4%                                   5.39%
    0.75               0         0.25                  13.5%                                   5.41%
    0.85               0         0.15                  12.9%                                   5.41%
    0.74               0         0.26                  13.6%                                   5.43%
    0.86               0         0.14                  12.8%                                   5.43%
    0.73               0         0.27                  13.6%                                   5.45%
    0.87               0         0.13                  12.8%                                   5.45%
    0.72               0         0.28                  13.7%                                   5.47%
    0.88               0         0.12                  12.7%                                   5.47%
    0.89               0         0.11                  12.7%                                   5.50%
    0.71               0         0.29                  13.7%                                   5.50%
      0.7              0           0.3                 13.8%                                   5.53%
      0.9              0           0.1                 12.6%                                   5.53%
    0.69               0         0.31                  13.9%                                   5.57%
    0.91               0         0.09                  12.5%                                   5.57%
    0.68               0         0.32                  13.9%                                   5.60%
    0.92               0         0.08                  12.5%                                   5.60%
    0.67               0         0.33                  14.0%                                   5.64%
    0.93               0         0.07                  12.4%                                   5.64%
    0.94               0         0.06                  12.4%                                   5.69%
    0.66               0         0.34                  14.0%                                   5.69%


                              www.classof1.com/homework-help/finance
 *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
                              submitting the same in lieu of their academic submissions for grades.
Sub: Finance                                                       Topic: Strategic Financing Decision
    0.65               0         0.35                  14.1%                                   5.73%
    0.95               0         0.05                  12.3%                                   5.73%
    0.64               0         0.36                  14.2%                                   5.78%
    0.96               0         0.04                  12.2%                                   5.78%
    0.97               0         0.03                  12.2%                                   5.83%
    0.63               0         0.37                  14.2%                                   5.83%
    0.62               0         0.38                  14.3%                                   5.88%
    0.98               0         0.02                  12.1%                                   5.88%
    0.61               0         0.39                  14.3%                                   5.94%
    0.99               0         0.01                  12.1%                                   5.94%
      0.6              0           0.4                 14.4%                                   6.00%
        1              0             0                 12.0%                                   6.00%
    0.59               0         0.41 
								
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