Susan Jones would like her investment portfolio to be selected from a combination of three stocks- Alpha, Beta, and Gamma. Let variables A, B, and G denote the percentages of the portfolio devoted to Alpha, Beta, and Gamma, respectively. Susan's objective is to minimize the variance of the portfolio's return, given by the following function:
3A² + 2B² + 2G² + 2AB - 1.1AG - 0.7BG
The expected returns for Alpha, Beta, and Gamma are 15%, 11%, and 9%, respectively. Susan wants the expected return for the total portfolio to be at least 10%. No individual stock can constitute more than 70% of the portfolio. Formulate this portfolio selection problem and solve using Excel.
What percentage of Susan's money will be invested in stocks A, B, and G respectively?
a) 21%, 33%, and 46%
b) 75%, 25%, and 0%
c) 27%, 24%, and 37%
d) 36%, 28%, and 11%