We calculate the minimum risk portfolio using solver in Excel. Solver is an Excel tool that is used to find optimal solutions for decision problems. It’s especially useful if you want to find a minimum or maximum answer by changing variable cells. In our case, we want to minimise the risk or standard deviation figure by changing the weight in stock A. Why is finding the minimum variance portfolio important? Certain investors will be more risk averse than others. For example, investors nearing retirement will likely be looking for a more stable income than someone who is 25-years old with no dependents. Therefore, they may find that a minimum variance portfolio better meets their investment goals.
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