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Gilda Bart, CEO - Melange Fund Selection Criteria

Good morning! It's Gilda from Anchorage. I want to recommend that you use the spreadsheet modeling approach to optimize the Melange Fund portfolios. Write me a memo that explains how you chose the funds and percentages that you did. Your memo should also identify the expected annual return and risk for each Melange Fund. Also, I'd like to see your spreadsheet solutions. I'll be looking for the report as soon as I return from the North.

See attached file for full problem description.

The table below contains five equally likely joint returns scenarios for the eight socially responsible funds.
Scenario Return
Mutual Fund Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5
Sustenance Energy -1% 0% 5% 0% 6%
Sherwood Social Justice -5% 12% -1% -3% 15%
Gaia Balanced 11% 28% -3% -6% 8%
Global Equities -17% 17% 22% 29% -4%
Faun Responsible Growth 16% 30% -10% -5% 29%
Winander Echo 39% -2% 35% -16% 22%
Falcon Renewal Growth 43% 26% 43% -9% 12%
Pyrrhus Victory -15% 29% 45% 0% 39%
Scenario Probability 0.2 0.2 0.2 0.2 0.2

From: Gilda Bart, CEO
To: Managing Director
Subject: Melange Fund Selection Criteria
To follow up on our conversation this morning, I've outlined these criteria for constructing the three Melange Funds from's eight existing mutual funds:
Melange Fund Expected Annual Return Risk Level
Denali Aggressive Growth Fund 17% High
BlueHill Moderate Growth Fund 11% Moderate
Wide Missouri Stability Fund 7.5% Low
Using the performance predictions for the eight existing mutual funds, construct portfolios that achieve these expected annual returns. The objective is to minimize the level of risk for each fund. Use the standard deviation of the returns in this objective.


Solution Summary

Solution is shown in Excel for you.