Your company Babylon LLC manages funds for corporates and wealthy individuals. Your company takes pride in the fact that each investment strategy is tailored to the clients needs. For a new client you have been authorized to invest $1,200,000 USD in two investment funds a stock fund and a money market fund. Each unit in the stock fund costs $50 with an expected annual return of 10%. Each unit in the money market fund costs $100 with an expected annual return of 4%. Due to the present market conditions your client is keen on minimizing risk but also earn $60,000 in returns. According to your in-house risk measurements each unit purchased in the stock index has a risk measurement of 8 and each unit purchased in the money market fund has a risk measurement of 3. Due to the high risk associated with the stock fund the client has asked you to invest at least $300,000 in the money market fund. As a portfolio manager at Babylon design a portfolio for your client with the minimum risk exposure.

A Formulate the problem

B Solve the problem in Excel (using solver tool)

C Fill out the recommendation: Based on the Excel results, to minimize risk you should recommend to have ____ units of the stock fund and _____ units of the money market fund in the clients portfolio. With this plan from you the portfolio has a minimum risk measurement of___________.