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A fund manager has P 10 million to invest in treasury bills, bonds, private placements and in risky venture. Relevant information about these various investments

A fund manager has P 10 million to invest in treasury bills, bonds, private placements and in risky venture. Relevant information about these various investments are presented below:

Investment

Yield rate p.a.

Maturity

Risk rating

Treasury Bill

6%

3 months

1

Bonds

8%

5 years

2

Private Placement

12%

6 months

4

Risky Venture

20%

3 years

8

Guidelines given by the fund manager were:

  1. 50% of the investment must have a maturity below one year
  1. Investment in Risky venture should not exceed 20% of funds invested.
  1. At least 30% should be invested in treasury bills.
  1. Total investments in items risk rating above 3 should not exceed 40% of total funds invested.

Formulate an LP model that would optimize return for this portfolio where X1 = investment in Treasury bills, X2 = investment in bonds, X3 = investment in private placement, X4 = investment in risky venture

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