Question
An investor has $50,000 to invest. Two money making activities, coded Alpha and Beta, available at the beginning of each of the next four years,
An investor has $50,000 to invest. Two money making activities, coded Alpha and Beta, available at the beginning of each of the next four years, starting now (the beginning of year 1). A third investment possibility, construction projects, will become available at the beginning of the second and fourth years. Alpha has a return of 12%, a risk factor of 5, and takes 3 years to mature. Beta has a return of 8%, risk factor of 3, and takes 2 years to mature. The construction projects yield a return of 7%, have a risk factor of 2, and mature in one year. The investor allows for some cash to be left over at the beginning of each year and assumes that uninvested cash has zero risk. The investor wants to determine the investment schedule that maximizes cash at the end of the four years. The investor does not want the risk level of his portfolio to exceed 3 during any year. (Linear Programming Problem)
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