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A client of an investment firm has $10000 available for investment. He has instructed that his money be invested in three stocks, so that no

A client of an investment firm has $10000 available for investment. He has instructed that his money be invested in three stocks, so that no more than $5000 is invested in any one stock but at least $1000 be invested in each stock. He has further instructed the firm to use its current data and invest in the manner that maximizes his overall gain during a one-year period. The stocks, the current price per share and the firms predicted stock price a year from now are summarized below:

Stock Current Price Projected Price 1 year
James $25 $35
QM $50 $60
Del Candy $100 $125

If the client had an additional $1000 available for investment, use the sensitivity report to determine what would happen to the optimal allocation of shares and to the resulting profit.

J QM DC Return

If the client increased the maximum investment to $6000 for just one stock, which one should it be? Use the appropriate shadow price to calculate the new profit when this change is made. Use the sensitivity report and the shadow price to calculate the change on the solution and the profit (one decimal place).

J QM DC Return

Suppose the profit on James candy decreased by $1 and the profit on QM increased by $1, use the 100% rule to calculate if this is an allowable change. State the % you get (2 decimal places). Then determine the new share allocation (if it remains unchanged, re-write) and the resulting profit.

100% value J QM DC $ Return

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