Sarah Williams has $100,000 to allocate to the investments listed in the following table. Bill Wallace,...
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Sarah Williams has $100,000 to allocate to the investments listed in the following table. Bill Wallace, her investment counselor, has prepared the following estimates for the potential annual return on each investment. investment expected return bonanza gold(high risk 15% stock) cascade telephone(low-risk 9% stock) money market account 7% two year treasury bonds 8% minimum return -50% 3% 6% 8% Sarah wishes to invest her money in such a way as to maximize her expected annual return based on Bill Wallace's projections, with the following restrictions. - At most $50,000 of her investment should be in stocks - At least $60,000 of her investment should have the potential of earning a 9% or greater annual return maximum return - The minimum overall annual return should be at least 4% - All $100,000 is to be invested. 100% 12% 9% 8% - At least $70,000 should be liquid during the year; this implies that at most $30,000 can be in two-year treasury bonds. Questions: a. Define decision variables, objective function, and constraints. Use the problem to give answer for each b. Define shadow prices and range of optimality, use the problem to give answer for each c. Assume the investment will perform independently of one another so that the returns on the investment opportunities are uncorrelated. Formulate and solve a linear program for Sarah Sarah Williams has $100,000 to allocate to the investments listed in the following table. Bill Wallace, her investment counselor, has prepared the following estimates for the potential annual return on each investment. investment expected return bonanza gold(high risk 15% stock) cascade telephone(low-risk 9% stock) money market account 7% two year treasury bonds 8% minimum return -50% 3% 6% 8% Sarah wishes to invest her money in such a way as to maximize her expected annual return based on Bill Wallace's projections, with the following restrictions. - At most $50,000 of her investment should be in stocks - At least $60,000 of her investment should have the potential of earning a 9% or greater annual return maximum return - The minimum overall annual return should be at least 4% - All $100,000 is to be invested. 100% 12% 9% 8% - At least $70,000 should be liquid during the year; this implies that at most $30,000 can be in two-year treasury bonds. Questions: a. Define decision variables, objective function, and constraints. Use the problem to give answer for each b. Define shadow prices and range of optimality, use the problem to give answer for each c. Assume the investment will perform independently of one another so that the returns on the investment opportunities are uncorrelated. Formulate and solve a linear program for Sarah
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a Decision Variables Lets define the following decision variables x1 The amount invested in Bonanza Gold highrisk stock x2 The amount invested in Casc... View the full answer
Related Book For
South-Western Federal Taxation 2020 Comprehensive
ISBN: 9780357109144
43rd Edition
Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman
Posted Date:
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