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PROBLEM ONE (10 pts): An investment company currently has $1 million available for investment in five differe stocks. The company wants to maximize the
PROBLEM ONE (10 pts): An investment company currently has $1 million available for investment in five differe stocks. The company wants to maximize the interest earned over the next year. The five investment possibilities along with the expected interest earned are shown below. To manage risk, the investment firm wishes to have at least 35% of the investment in stocks A and B. Furthermore, no more than 15% of the investment may be in stock E. Investment Stock A Expected Interest Earned (%) 7 Stock B 9 Stock C Stock D Stock E 8 10 11 An LP is formulated to maximize expected interest earned and executed using Solver. Max 0.07A+0.09B+0.08C+0.10D+0.11E Subject to: A+B+C+D+ES 1,000,000 (Constraint 1); A+B 2350,000 (Constraint 2); E150,000 (Constraint 3) A, B, C, D, EO The sensitivity report is represented below. Final Cell $854 Name Stock A Value Reduced Cost Objective Allowable Allowable Coefficient Increase Decrease SC14 Stock B 350000 -0.02 0.07 0.02 18-30 0.09 0.01 0.02 1054 Stock C -0.02 0.00 0.02 1E-30 SES4 Stock D 500000 0.1 SF54 Stock E 150000 0.11 0.01 18-30 001 0.01 Constraints Final Cell Name Value Shadow Price Constraint $0$7 Constraint 1 1000000 0.1 R.H. Side 1000000 Allowable Increase Allowable Decrease 18-30 500000 $G$8 Constraint 2 350000 -0.01 350000 500000 350000 SGS9 Constraint 3 150000 0.01 150000 500000 150000
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