I have divided this question into two submissions because of length. It may be easier if it is assigned to the same tutor. I am interested in getting the instructions step by step more than the answers. I thank you for your assistance! This half is Question a, b, c & d

28. The Pfeiffer Company manages approximately $15 million for clients. For each client, Pfeiffer chooses a mix of three investment vehicles: a growth stock fund an income fund, and a money market fund. Each client has different investment objectives and different tolerances for risk. To accommodate these differences, Pfeiffer places limits on the percentage of each portfolio that may be invested in the three funds and assigns a portfolio risk to each client.

Heres how the system works for Dennis Hartmann, one of Pfeiffers clients. Based on an evaluation of Hartmanns risk tolerance, Pfeiffer has assigned Hartmanns portfolio a risk index of 0.05. Furthermore, to maintain diversity, the fraction of Hartmanns portfolio invested in the growth and income funds must be at least 10% for each, and at least 20% must be in the money market fund.

The risk ratings for the growth, income, and money market funds are 0.10, 0.05 and 0.01, respectively. A portfolio risk index is computed as a weighted average of the risk ratings for the three funds, where the weights are the fraction of the portfolio invested in each of the funds. Hartmann has given Pfeiffer $300,000 to manage. Pfeiffer is currently forecasting a yield of 20% on the growth fund, 10% on the income fund and 6% on the money market fund.

1. Develop a linear programming model to select the best mix of investments for Hartmanns portfolio.
2. Solve the model you develop in part (a).
3. How much may the yields on the three funds vary before it will be necessary for Pfeiffer to modify Hartmanns portfolio?
4. If Hartmann were more risk tolerant, how much of a yield increase could he expect? For instance, what if his portfolio risk index is increased to 0.06?
5. If Pfeiffer revised the yield estimate for the growth fund downward to 0.10 how would you recommend modifying Hartmanns portfolio?
6. What information must Pfeiffer maintain on each client in order to use this system to manage client protfolios?
7. On a weekly basis Pfeiffer revises yield estimates for the three funds. Suppose Pfeiffer has 50 clients. Describe how you would envision Pfeiffer making weekly modifications in each clients portfolio and allocating the total funds managed among the three investment funds.