Problem: Adjusting a portfolio of assets in such a way that desired return after broker's fees and other transaction costs is met with minimum variance.
As the expected return and variances of each asset change, the optimal portfolio is almost certain to change. Adjusting your investments with every change may cheer up your broker, but the commissions or transaction costs will slowly erode the value of your portfolio. Typically, there's a cost associated with each sale or purchase. Using this model, you need to take these transaction costs into account in calculating how to adjust your portfolio.
According to your estimates, your current holdings will yield a 12.2% return. You are
interested in adjusting your portfolio to lower the variance, yet achieve a return of at
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