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Mr . Rahul, a retired govt. officer, has recently received his retirement benefits, viz. provident fund, gratuity etc. He is contemplating as to how much
Mr Rahul, a retired govt. officer, has recently received his retirement benefits, viz. provident fund, gratuity etc. He is contemplating as to how much funds he should invest in various alternatives open to him so as to maximise returns on investment. The investment alternatives are: government securities fixed deposits of a public limited company, equity shares, time deposits in banks, national savings certificates and real estate. He has made a subjective estimate of the risk involved. The data on the return of investment, the number of years for which the funds will be blocked to earn this return on investment and the subjective risk involved are as follows:
Investment Alternatives Return No of Years Risk
Government securities
Company Deposits
Equity shares
Time deposits
NSC
Real estate
He was wondering what percentage of funds he should invest in each alternative so as to maximize the return on investment. He decided that average risk should not be more than and funds should not be locked up for more than years. Formulate the LPP and solve, if he does not want more than of the investment to be put in the real estate.
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