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I am doing some revision questions on my Portfolio Theory module, and have come across the following question:

Consider an investor who has constructed a risky portfolio from N securities. The investment opportunity set is described by the equation:

$$\sigma^2 = 10 - 5{\times}E(r) + 0.5\times(E(r))^2$$

Find the minimum variance portfolio.

I can't find any info in my notes, but my intuition says differentiate, set to zero and rearrange for E(r)?


migrated to math.stackexchange.com by Jason B May 1 '12 at 19:55

This question belongs on our site for people studying math at any level and professionals in related fields.

Does anything strike you as odd about the resulting value of sigma squared, when you follow your intuition? Could there be a mistake in the transcription of the question? (I could be wrong, I don't do MPT, it just strikes me as a bit peculiar, that's all) –  EnergyNumbers Jan 7 '12 at 7:08

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