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Investment Advisors, Inc., is a brokerage firm that manages stock portfolios for a numberof clients. A particular portfolio consists of U shares of U .
Investment Advisors, Inc., is a brokerage firm that manages stock portfolios for a numberof clients. A particular portfolio consists of U shares of US Oil and H shares ofHuber Steel. The annual return for US Oil is $ per share and the annual return forHuber Steel is $ per share. US Oil sells for $ per share and Huber Steel sells for$ per share. The portfolio has $ to be invested. The portfolio risk index per share of US Oil and per share for Huber Steel has a maximum of In addition, the portfolio is limited to a maximum of shares of US Oil. The linearOptimal Objective Value Variable Value Reduced CostU H Constraint SlackSurplus Dual ValueObjective Allowable AllowableVariable Coefficient Increase DecreaseU H RHS Allowable AllowableConstraint Value Increase Decrease Infinite programming formulation that will maximize the total annual return of the portfolio isas follows:Max U H Maximize total annual returns.tU H Funds availableU D Risk maximumU US Oil maximumThe computer solution of this problem is shown in Figure a What is the optimal solution, and what is the value of the total annual return?b Which constraints are binding? What is your interpretation of these constraints interms of the problem?c What are the dual values for the constraints? Interpret each.d Would it be beneficial to increase the maximum amount invested in US Oil? Why orwhy not?
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