LP models are used by many Wall Street firms to select a desirable bond portfolio. The following

Question:

LP models are used by many Wall Street firms to select a desirable bond The following is a simplified version of such a model. A company is considering investing in four bonds; $1 million is available for investment. The expected annual return, the worst-case annual return on each bond, and the duration of each bond are given in the file S14_83.xlsx.
The company wants to maximize the from its bond investments, subject to three constraints:
• The worst-case return of the bond must be at least 8%.
• The average duration of the must be at most 6. For example, a that invests $600,000 in bond 1 and $400,000 in bond 4 has an average duration of [600,000(3) + 400,000(9)]/1,000,000 = 5.4
• Because of diversification requirements, at most 40% of the total amount invested can be invested in a single bond. Determine how the company can maximize the on its investment.

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...