Question

Lymann Brothers has a substantial number of clients who wish to own a mutual fund portfolio that closely matches the performance of the S&P 500 stock index. A manager at Lymann Brothers has selected five mutual funds that will be considered for inclusion in the portfolio. The manager must decide what percentage of the portfolio should be invested in each mutual fund.

Mutual Fund	Year 1	Year 2	Year3	Year 4
International Stock	25.64	27.62	5.80	−3.13
Large-Cap Blend	15.31	18.77	11.06	4.75
Mid-Cap Blend	18.74	18.43	6.28	−1.04
Small-Cap Blend	14.19	12.37	−1.92	7.32
Intermediate Bond	7.88	9.45	10.56	3.31
S&P 500	13.00	12.00	7.00	2.00

Minimize the variance of the portfolio subject to constraints on the expected return, assuming that Lymann Brothers' client requires the expected portfolio return to be at least 9 percent. Kindly provide references

Answer 1