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Barbara Roberts recently received $29,000 as a small inheritance from a distant relative. She wants to invest the money so as to earn $900
Barbara Roberts recently received $29,000 as a small inheritance from a distant relative. She wants to invest the money so as to earn $900 to buy a notebook computer next year when she enters graduate school one year from now. (Barbara plans to use her inheritance to pay the tuition for her graduate studies.) She wants to create a portfolio using three stocks, whose annual percentage returns are summarized in the following table: Year Amalgamated Industries 1 -3.3 Babbage Computers Consolidated Foods 5.92 -2.4 2 -4.7 -3.8 28.1 3 11.9 -7 -7.2 4 9.7 6.6 -2.3 50 8.6 -4.2 20.4 6 9.4 11.2 17.4 7 5.3 3.2 -11.8 8 -4.9 16.1 -6.6 9 8.5 10.8 -13.4 10 -8.3 -8.3 10.9 Barbara wants to diversify her potential holdings by investing at least $500, but no more than $20,000, in any one stock. Barbara wants to minimize the total variance (which also involves the covariance between the various pairs of stock) of the portfolio. (a) Formulate and solve a NLP model to determine how much money Barbara should invest in each stock in order to meet her financial goals. What is the optimal solution? (Let A be the amount in dollars invested in Amalgamated Industries, B be the amount in dollars invested in Babbage Computers, and C be the amount in dollars invested in Consolidated Foods. Use the COVAR() function in Excel when solving your model. Set the convergence value for the Standard GRG Nonlinear Engine to at most 0.0000001. Round your numeric values to the nearest integer.) (A, B, C) =
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