Question
The IAF Company is an investment advisory firm. IAF needs to invest $200,000 from a client in three types of funds: a growth stock fund,
The IAF Company is an investment advisory firm. IAF needs to invest $200,000 from a client in three types of funds: a growth stock fund, an income fund, and a money market fund. The annual rate of return for the three funds are 14%, 7% and 4% respectively. The calculated risk measure values are 0.12, 0.06 and 0.01 respectively.
The client would like to minimize the risk of the portfolio while satisfying the following conditions:
(a) All of $200,000 must be divided among the three funds.
(b) The amount in the money market fund must be at least 30% of the amount in the growth fund.
Using the following decision variables, type the parts of the linear programming model mentioned in the questions below.
Let G = amount of $ invested in growth fund,
I = amount of $ invested in income fund,
M = amount of $ invested in money market fund.
The answers should be in an algebraic form, e.g., 2 G + 3 I + 4 M, not Excel formulas.
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