Blair & Rasen, Inc. (B&R) is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who cantacted B&R this past week has a maximum of $50,000 to invest. B&R's investment advisor decides to recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 18%, while the Blue Chip fund has a projected annual return of 8%. The investment advisor requires that at most $25,000 of the client's funds should be invested in the Intemet fund. B&R services include a risk rating for each investment alternative. The Internet fund, which is the more risky of the two investment alternatives, has a risk rating of 5 per thousand dollars invested. The Blue Chip fund has a risk rating of 5 per thousand dollars invested. For example, if $10,000 is invested in cach of the two investment funds, B&R's risk rating for the portfolio would be 5(10) + 5(10) = 100. Finally, B&R developed a questionnaire to measure each client's risk tolerance. Based on the responses, each client is classified as a conservative, moderate, or aggressive investor. Suppose that the questionnaire results classified the current client as a moderate investor. B&R recommends that a client who is a moderate investar limit his or her portfolia to a maximum risk rating of 230. (a) Formulate a linear programming model to find the best investment strategy for this client. Let I = Intemet fund investment in thousands B = Blue Chip fund investment in thousands If required, round your answers to two decimal places. If an amount is zero, enter "0". If the constant is "l' it must be entered in the box. Max 0.181 / + 0.08 B s.t. 11 + 1 BS 50 Available investment funds 1 1 + OBS 25 Maximum Investment in the Internet fund 5 + B 230 Maximum risk for a moderate investor LB 0 (b) Build a spreadsheet model and solve the problem using Solver. What is the recommended investment portfolio for this client? Internet Fund - s 25000 Blue Chip Fund = S What is the annual return for the portfolia? $ (c) Suppose that a second client with $50,000 to invest has been classified as an aggressive investor. B&R recommends that the maximum portfolia risk rating for an aggressive investor is 340. What is the recommended investment portfolio for this aggressive investor? Internet Fund -s 25000 Blue Chip Fund = S 25000 6500 Annual Returns (d) Suppose that a third client with $50,000 to invest has been dassified as a conservative investor. BAR recommends that the maximum portfolio risk rating for a conservative investor is 150. Develop the recommended investment portfolio for the conservative Investor. If an amount is zero, enter"0" Internet Funds 25000 Blue Chip Fund = S Annual Return as Blair & Rasen, Inc. (B&R) is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who cantacted B&R this past week has a maximum of $50,000 to invest. B&R's investment advisor decides to recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 18%, while the Blue Chip fund has a projected annual return of 8%. The investment advisor requires that at most $25,000 of the client's funds should be invested in the Intemet fund. B&R services include a risk rating for each investment alternative. The Internet fund, which is the more risky of the two investment alternatives, has a risk rating of 5 per thousand dollars invested. The Blue Chip fund has a risk rating of 5 per thousand dollars invested. For example, if $10,000 is invested in cach of the two investment funds, B&R's risk rating for the portfolio would be 5(10) + 5(10) = 100. Finally, B&R developed a questionnaire to measure each client's risk tolerance. Based on the responses, each client is classified as a conservative, moderate, or aggressive investor. Suppose that the questionnaire results classified the current client as a moderate investor. B&R recommends that a client who is a moderate investar limit his or her portfolia to a maximum risk rating of 230. (a) Formulate a linear programming model to find the best investment strategy for this client. Let I = Intemet fund investment in thousands B = Blue Chip fund investment in thousands If required, round your answers to two decimal places. If an amount is zero, enter "0". If the constant is "l' it must be entered in the box. Max 0.181 / + 0.08 B s.t. 11 + 1 BS 50 Available investment funds 1 1 + OBS 25 Maximum Investment in the Internet fund 5 + B 230 Maximum risk for a moderate investor LB 0 (b) Build a spreadsheet model and solve the problem using Solver. What is the recommended investment portfolio for this client? Internet Fund - s 25000 Blue Chip Fund = S What is the annual return for the portfolia? $ (c) Suppose that a second client with $50,000 to invest has been classified as an aggressive investor. B&R recommends that the maximum portfolia risk rating for an aggressive investor is 340. What is the recommended investment portfolio for this aggressive investor? Internet Fund -s 25000 Blue Chip Fund = S 25000 6500 Annual Returns (d) Suppose that a third client with $50,000 to invest has been dassified as a conservative investor. BAR recommends that the maximum portfolio risk rating for a conservative investor is 150. Develop the recommended investment portfolio for the conservative Investor. If an amount is zero, enter"0" Internet Funds 25000 Blue Chip Fund = S Annual Return as
