Good Example Of About The Research: Research Paper

Investments

We initiated this paper with the objective of earning $1 million in 20 years down the line with the present value of investment of $250000. At the same time, in part A of this report, we also discussed the importance of diversification for our portfolio which eliminates most of the unsystematic risk leaving our portfolio exposed only to market risk.
Thus, in order to achieve our objective and to create a diversified portfolio, we selected four equity stocks from US stock exchange, namely, Ebay Inc., Apple Inc., Starbucks Inc. and Bank of America. In addition, since we want a guaranteed on our investment, risk free asset was also included in our portfolio that offers 2% return on annual basis. However, in order to find optimal portfolio weights that will multiply our portfolio to $1 million in 25 years and least standard deviation, we used excel solver function.

Data:

In order to calculate the optimal weights, we used past 5 year historical closing prices for each stock. The closing prices were then used to calculate monthly returns and standard deviation on annualized basis.
This was followed by a correlation and weighted covariance matrix, which we used to calculate portfolio standard deviation, later to be used while finding optimal weights of each asset in our portfolio.

Problem Solving:

Conclusion and Recommendation
Using excel solver we found that in order to earn 7.18% return on per annum basis under minimal standard deviation, our portfolio weights should be: