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Business, 03.01.2020 18:31 Prettygirlyaya

The return for a portfolio consisting of n securities will be based on the return for each of the securities as well as the proportion of the portfolio invested in each security: 1 n i i i r p x    where r is the return of the portfolio, pi is the proportion of the portfolio invested in security i, and xi is the return of security i. typically, we wish to maximize the return, r, but that is subject to constraints regarding the risk that we can tolerate. for a given risk level, we wish to set our proportions, pi, to maximize the return. the variance of the return of the portfolio is a measure of the risk. the variance of the return is calculated as

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