PROBLEM 2

The following table shows standard deviations and correlation coefficients for seven stocks from different countries.

Alcan BP Deutsche Bank Fiat Heineken LVMH Nestle Standard Deviation
Alcan 1,00 0,34 0,53 0,30 0,20 0,53 0,08 29,7%
BP 1,00 0,44 0,26 0,20 0,27 0,29 18,4%
Deutsche Bank 1,00 0,52 0,22 0,56 0,24 30,1%
Fiat 1,00 0,17 0,42 0,26 35,9%
Heineken 1,00 0,33 0,50 17,2%
LVMH 1,00 0,31 31,0%
Nestle 1,00 13,8%

a. Calculate the variance of a portfolio with equal investments in each stock.

b. Your eccentric Aunt Claudia has left you $50,000 in Alcan shares plus $50,000 cash. Unfortunately her will requires that the Alcan stock not be sold for one year and the $50,000 cash must be entirely invested in one of the stocks shown in the above Table. What is the safest attainable portfolio under these restrictions?

What do YOU think ?
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Well lol I don't have any idea at all about the problem and that is why I wanted help from you... and besides you are not going to only do the work for me but also explain it while solving the problem... so I basically don't find any problem in you helping me out...

Well lol I don't have any idea at all about the problem and that is why I wanted help from you... and besides you are not going to only do the work for me but also explain it while solving the problem... so I basically don't find any problem in you helping me out...