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Math Help - portforlio (shares) analysis - optimization

  1. #1
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    Question portforlio (shares) analysis - optimization

    I was wondering if anyone can help me with this problem, the question is written first and my problem is stated below it.

    an investor has 1300, to invest in a portfolio of three shares

    shares 1 2 and 3 yield expected returns of 7/15 , 2/25 , 1/25 respectively to each pound inested, with varianes 3/50 , 9/100 , 11/100 respectively

    i am also given the covariances - (i dont have the symbol for the variance sign so i will just use q, which are
    q12 = 7/250
    q13 = 7/500
    q23 = -1/125

    also a return of atleast 7% of the avaiable budget is required at min risk, where risk is measured by the variance of the return.

    i need to minimize the problem to find the amount that should be invested in each share if the investors whole budget is to be spent.


    The problem i am having with this question is the variance. In lectures iv been given examples with out them mentioning the the variance values.

    I was wondering how to solve the problem with the variances 3/50 , 9/100 , 11/100 . do i need to manipulate my working out to include the variance?
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  2. #2
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    Smile problem solved

    i have worked out the problem..all i need to use is a variance-covariance matrix...dont need to do anything to the values of the variance.
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