An investor has decided to invest 1 million in the shares of two companies, company E and company B. the projections of returns from the shares of the two companies along with their probabilities is shown below. Required; Determine the proportion of each shares required to formulate a minimum risk portfolio.
probability : company E : Company B 0.20 : 12 : 16 0.25 : 14 : 10 0.25 : -7 : 28 0.30 : 28 : -2
I used the approach of variance. From my insights i weighted the variances and got company E could weight 0.4241 and company B 0.5758. I am however not sure of the approach