Question
The esteemed brokerage firm of Black, Scholes and Merton has just been instructed by one of its clients to invest $250,000 of her money obtained
The esteemed brokerage firm of Black, Scholes and Merton has just been instructed by one of its clients to invest $250,000 of her money obtained recently through the sale of Netflix, Inc. The client has a good deal of trust in the brokerage firm, but she also has her own ideas about the distribution of the funds being invested. In particular, she requests that the firm select whatever stocks and bonds they believe are well rated, but within the following guidelines: Municipal bonds should constitute at least 20% of the investment At least 40% of the funds should be placed in a combination of electronic firms, airline firms and drug manufacturers No more than 50% of the amount invested in municipal bonds should be placed in a high risk, high yield nursing home stock. Subject to these constraints, the clients goal is to maximize projected return on investment. This esteemed brokerage firm is aware of these guidelines and prepares a list of high quality stocks and bonds and their corresponding rates of return: Investment Projected Rate of Return (%) Bruderheim municipal bonds 5.3 SAMU Electronics stocks 6.8 Westplane Airlinesstocks 4.9 Trudeau Drugs stocks 8.4 Happy Days Nursing Homes stocks 11.8 (Let M = $ invested in municipal bonds, E = $ invested in electronic stocks, A = $ invested in airline stocks, D = $ invested in pharmaceutical stocks, and N = $ invested in nursing home company stocks) Formulate the problem algebraically as a linear programming model. (5 marks) Solve this problem using Excel. (5 marks) please link your excel work
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started