Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Varma Investment Services must develop an investment portfolio for a new client. As an initial investment strategy, the new client would like to restrict
Varma Investment Services must develop an investment portfolio for a new client. As an initial investment strategy, the new client would like to restrict the portfolio to a mix of two stocks. Stock Price/Share ($) Estimated Annual Return (%) 6 AGA Products 50 2 Key Oil 100 10 The client wants to invest $38,000 and established the following two investment goals. Priority Level 1 Goal Goal 1: Obtain an annual return of at least 9%. Priority Level 2 Goal Goal 2: Limit the investment in Key Oil, the riskier investment, to no more than 60% of the total investment. (a) Formulate a goal programming model for the Varma Investment problem. (Let x, be the number of shares of stock i purchased, di be the deviation variable which exceeds the value of goal i, dni be the deviation variable which is less than the value of goal i, for i = 1, 2.) Min Pdp+dn )+P (dp+ dn X s.t. Funds Available 50x1 +100x2 < 38000 P Goal P2 Goal 0 for i = 1, 2 (b) Use the graphical goal programming procedure to obtain a solution. (x1, x2) =
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