Jane Maine is an investment adviser for Euro Accounts Inc. She is setting up a portfolio for a client willing to invest 200,000 and after an extensive research she has identified the following 4 stock options (annual rates of return are given per dollar invested, risk measures are also estimated per dollar invested):

Stock A with a 12.% annual return, risk measure of .1 and a 100$ price per share

Stock B with an 8% annual return, risk index of .07 and a 50$ price per share

Stock C with a 6% return, risk index of .05 costing 80$ per share

Stock D with a 10% annual return, risk index of .08 and a 40$ price per share

The following guidelines have been established:

Risk index of the portfolio should not exceed .08

No more than 40% of the funds should be allocated to stock A

At least 15% of the investment should be in stock C

Develop a linear programming model to find out how much should be invested in each alternative to maximize return (and satisfy all of the constraints/guidelines)

Step I

Define decision variables (Is completed refer below)

XA - $ amount to invest in stock A

XB - $ amount to invest in stock B

XC - $ amount to invest in stock C

XD - $ amount to invest in stock D

Step II

Define the objective function

Step III

Define the constraints