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Q 1 . An investor is considering allocating $ 1 0 , 0 0 0 among five investment alternatives. The five alternatives and their respective
Q An investor is considering allocating $ among five investment alternatives. The five
alternatives and their respective fund categories, risk levels, and average annual returns are
shown below:
The risk level of each investment is rated on a scale of to where is very conservative and
is very risky. The investor would like to maximize the average annual return on his
investment subject to the following restrictions:
The average risk level of the entire investment should not exceed The average here is a
weighted average in terms of the amount of money invested in each fund.
of the investment should be placed in money market funds. In other words, you
should invest at least and at most of the budget into the money market funds
At most $ should be invested in the aggressive growth fund.
Construct and solve a linear optimization model to determine the optimal allocation of the
investor's money. The decision variables, A B C D and E are defined as the amount of
money you will invest into Adams, Barney, Chilton, Dunster and Excelsior, respectively.
Please write down your mathematical model using the decision variables A B C D and E defined.
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