Homework help?
8. Suppose the risk index for the money market fund increases from its current value of 3 to 6.5. How does the optimal solution changes, if at all? Can you determine the value of objective function? Show calculations (if possible). 9. Which constraints are binding? Explain. 10. To minimize risk more, what option is better for the client: (a) to invest extra 10K decrease annual income requirement by 2K or (c) increase the minimum requi in money market up to 5,000? Show calculations for each part. est extra 10K or (b) to um requirements for units Innis Investment manages funds for a number of companies and wealthy clients. The inve strategy is tailored to each client's needs. For a new client. Innis has been authorized million in two investment funds: a stock fund and a money market fund. Each unit of the costs $50 and provide an annual rate of return of 10%: each unit of the money market Tundu and provides an annual rate of return of 4%. Innis has been authorized to invest up to $1.2 market fund. Each unit of the stock fund unit of the money market fund costs $100 The client wants to minimize risk subject to the requirement that the annual income from the investment be at least $60,000. According to Innis's risk measurement system, each unit stock fund has a risk index of 8, and each unit invested in the money market fund has a risk index of 3; the higher risk index associated with the stock fund simply indicates that it is the riskier investment, Innis's client also specifies that at least $300,000 (which is equivalent to at least 3,000 units = $300,000/$100) be invested in the money market fund. Let S = number of units purchased in the stock fund by Innis Investment for a new client Let M = number of units purchased in the money market fund by Innis Investment for a new client 1. Fill the blanks in the model formulation: Min S+ 3M subject to Funds Available: 50S +_ M=3,000 Non-negativity: _ >=0, _>=0 Use the sensitivity report to answer questions: Variable Cells Final Reduced Name Value Cost $B$13 DVs values: StockFunds 40000 $C$13 DVs values: Money Market 100000 Cell Objective Allowable Allowable Coefficient Increase Decrease 8 1E+30 4.25 3 3.4 1E+30 Constraints Cell Name $B$18 Funds Available $B$19 Annual income $$ZO Units in money market Final Shadow Constraint Allowable Allowable Value Price R.H. Side Increase Decrease 1200000 -0.058666667 1200000 300000 420000 60000 2.166666667 60000 42000 12000 10000 0 3000 70001E+30 8. Suppose the risk index for the money market fund increases from its current value of 3 to 6.5. How does the optimal solution changes, if at all? Can you determine the value of objective function? Show calculations (if possible). 9. Which constraints are binding? Explain. 10. To minimize risk more, what option is better for the client: (a) to invest extra 10K decrease annual income requirement by 2K or (c) increase the minimum requi in money market up to 5,000? Show calculations for each part. est extra 10K or (b) to um requirements for units Innis Investment manages funds for a number of companies and wealthy clients. The inve strategy is tailored to each client's needs. For a new client. Innis has been authorized million in two investment funds: a stock fund and a money market fund. Each unit of the costs $50 and provide an annual rate of return of 10%: each unit of the money market Tundu and provides an annual rate of return of 4%. Innis has been authorized to invest up to $1.2 market fund. Each unit of the stock fund unit of the money market fund costs $100 The client wants to minimize risk subject to the requirement that the annual income from the investment be at least $60,000. According to Innis's risk measurement system, each unit stock fund has a risk index of 8, and each unit invested in the money market fund has a risk index of 3; the higher risk index associated with the stock fund simply indicates that it is the riskier investment, Innis's client also specifies that at least $300,000 (which is equivalent to at least 3,000 units = $300,000/$100) be invested in the money market fund. Let S = number of units purchased in the stock fund by Innis Investment for a new client Let M = number of units purchased in the money market fund by Innis Investment for a new client 1. Fill the blanks in the model formulation: Min S+ 3M subject to Funds Available: 50S +_ M=3,000 Non-negativity: _ >=0, _>=0 Use the sensitivity report to answer questions: Variable Cells Final Reduced Name Value Cost $B$13 DVs values: StockFunds 40000 $C$13 DVs values: Money Market 100000 Cell Objective Allowable Allowable Coefficient Increase Decrease 8 1E+30 4.25 3 3.4 1E+30 Constraints Cell Name $B$18 Funds Available $B$19 Annual income $$ZO Units in money market Final Shadow Constraint Allowable Allowable Value Price R.H. Side Increase Decrease 1200000 -0.058666667 1200000 300000 420000 60000 2.166666667 60000 42000 12000 10000 0 3000 70001E+30
