A portfolio manager is trying to balance investments between bonds, stocks and cash. The return on stocks is 12 percent, 9 percent on bonds, and 3 percent on cash
The total portfolio is $1 billion, and he or she must keep 10 percent in cash in accordance with company policy. The fund's prospectus promises that stocks cannot exceed 75 percent of the portfolio, and the ratio of stocks to bonds must equal two. Formulate this investment decision as a linear programming problem, defining fully your decision variables and then giving the objective function and constraints.
Let X1 = the amount invested in bonds
X2 = the amount invested in stocks
X3 = the amount invested in cash
Max: z = .09X1 + .12X2 + .03X3
s.t. X1 + X2 + X3 ≤ 1,000,000,000 Portfolio value
X1 = 100,000,000 10% minimum stock
X2 ≤ 750,000,000 75% maximum cash
2X1 - X2 = 0 2:1 ratio stocks to bonds
X1, X2, X3 > 0
You might also like to view...
Accruals are needed when an unrecorded expense has been incurred or an unrecorded revenue has been earned
Indicate whether the statement is true or false
TrustUs Insurance's tagline is "You're in safe hands with TrustUs," and Serenity Life Insurance uses a rock as its trade symbol because it wants to convey stability. What type of promotion strategy are these companies using?
a. Engaging in postpurchase communication b. Creating a strong organizational image c. Using personal information sources d. Adopting standardization
Define the marginal revenue of labour.
What will be an ideal response?
In the ________ of job evaluation, job subfactors are used to describe compensable factors in detail.
A. point method B. ranking method C. factor comparison method D. job classification method