Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Set up this decision problem as an LP model in general form (no need to solve, just show set up) You have been given $100,000

Set up this decision problem as an LP model in general form (no need to solve, just show set up)

You have been given $100,000 by a client to invest in the stock market. After some preliminary analysis, you find that there are five stocks that you want to consider for your client's investment portfolio. The price per share, expected annual rate of return, and risk index for each of the five stocks are summarized in the table below:

Stock: Price Per Share: Expected Annual Return: Risk Index Per Share

Monsanto 85 15 .15

Dean Foods 20 5 .06

Kraft Foods 23 8 .09

General Mills 52 10 .12

Whole Foods 20 6 .05

The risk index for each stock is your client's opinion of the riskiness of each investment. Your client has put a limit of 200 as the total amount of risk she will bear for the entire portfolio (total risk risk index per share number of shares). In addition, she does not want to invest in more than 500 shares of Monsanto stock. Finally, you cannot invest more than the $100,000 that your client has given to you. Your objective is to maximize the expected annual return for your client's portfolio. Assume that your commission does not figure into this exercise.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Linear Algebra With Applications

Authors: Gareth Williams

8th Edition

1449679579, 9781449679576

More Books

Students also viewed these Mathematics questions

Question

Where did the faculty member get his/her education? What field?

Answered: 1 week ago

Question

Go, do not wait until I come

Answered: 1 week ago

Question

Make eye contact when talking and listening

Answered: 1 week ago