# Finance_SL3 by ClassOf1

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```									                 Finance

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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

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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%

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*The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
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%

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*The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
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%

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*The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
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%

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*The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
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%

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*The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
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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