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Blair & Rosen, Inc. (B&R), is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who contacted B&R this past week has a maximum of $50,000 to invest. B&R's investment advisor decides recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 8%, whereas the Blue Chip fund has a projected annual return of 6%. The investment advisor requires that at most $35,000 of the client's funds should be invested in the Internet fund. B&R services include a risk rating for each investment alternative. The Internet fund, which is the more risky of the two investment alternatives, has a risk rating of 6 per thousand dollars invested. The Blue Chip fund has a risk rating of 4 per thousand dollars invested. For example, if $10,000 is invested in each of the two investment funds, B&R's risk rating for the portfolio would be 6(10) + 4(10) = 100. Finally, B&R developed a questionnaire to measure each client's risk tolerance. Based on the responses, each client is classified as a conservative, moderate, or aggressive investor. Suppose that the questionnaire results classified the current client as a moderate investor. B&R recommends that a client who is a moderate investor limit his or her portfolio to a maximum risk rating of 240. (a) Formulate a linear programming model to find the best investment strategy for this client. (Assume N is the amount invested in the internet fund project and B is the amount invested in the Blue Chip fund. Express the amounts invested thousands of dollars.) Max 0.08N + 0.06B s.t. Available investment funds 50 X Maximum investment the internet fund 35 X Maximum risk for a moderate investor 240 X N, B20 (b) Build a spreadsheet model and solve the problem using Excel Solver. What is the recommended investment portfolio (in dollars) for this client? internet fund $ X blue chip fund $ x What the annual return (in dollars) for the portfolio? $ x (b) Suppose that a second client with $50,000 to invest has been classified as an aggressive investor. B&R recommends that the maximum portfolio risk rating for an aggressive investor is 270. What is the recommended investment portfolio (in dollars) for this aggressive investor? internet fund $ blue chip fund $ (d) Suppose that a third client with $50,000 to invest has been classified as a conservative investor. B&R recommends that the maximum portfolio risk rating for a conservative investor is 160. Develop the recommended investment portfolio (in dollars) for the conservative investor. internet fund x blue chip fund x Blair & Rosen, Inc. (B&R), is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who contacted B&R this past week has a maximum of $50,000 to invest. B&R's investment advisor decides recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 8%, whereas the Blue Chip fund has a projected annual return of 6%. The investment advisor requires that at most $35,000 of the client's funds should be invested in the Internet fund. B&R services include a risk rating for each investment alternative. The Internet fund, which is the more risky of the two investment alternatives, has a risk rating of 6 per thousand dollars invested. The Blue Chip fund has a risk rating of 4 per thousand dollars invested. For example, if $10,000 is invested in each of the two investment funds, B&R's risk rating for the portfolio would be 6(10) + 4(10) = 100. Finally, B&R developed a questionnaire to measure each client's risk tolerance. Based on the responses, each client is classified as a conservative, moderate, or aggressive investor. Suppose that the questionnaire results classified the current client as a moderate investor. B&R recommends that a client who is a moderate investor limit his or her portfolio to a maximum risk rating of 240. (a) Formulate a linear programming model to find the best investment strategy for this client. (Assume N is the amount invested in the internet fund project and B is the amount invested in the Blue Chip fund. Express the amounts invested thousands of dollars.) Max 0.08N + 0.06B s.t. Available investment funds 50 X Maximum investment the internet fund 35 X Maximum risk for a moderate investor 240 X N, B20 (b) Build a spreadsheet model and solve the problem using Excel Solver. What is the recommended investment portfolio (in dollars) for this client? internet fund $ X blue chip fund $ x What the annual return (in dollars) for the portfolio? $ x (b) Suppose that a second client with $50,000 to invest has been classified as an aggressive investor. B&R recommends that the maximum portfolio risk rating for an aggressive investor is 270. What is the recommended investment portfolio (in dollars) for this aggressive investor? internet fund $ blue chip fund $ (d) Suppose that a third client with $50,000 to invest has been classified as a conservative investor. B&R recommends that the maximum portfolio risk rating for a conservative investor is 160. Develop the recommended investment portfolio (in dollars) for the conservative investor. internet fund x blue chip fund x
