Let us assume that you have inherited Rs 100,000 from your father-in-law that can be invested in a combination of only two stock portfolios, with the maximum investment allowed in either portfolio set at Rs 75,000. The first portfolio has an average return of 10%, whereas the second has 20%. In terms of risk factors associated with these portfolios, the first has a risk rating of 4 (on a scale from Oto 10), and the second has 9. Since you want to maximise your return, you will not accept an average rate of return below 12%

or a risk factor above 6. Hence, you then face the important question. How much should you invest in each portfolio?