# Recall the Inn is Investments problem (Chapter 2, Problem 39). Letting S = units purchased in the

## Question:

S = units purchased in the stock fund

M = units purchased in the money market fund

Leads to the following formulation:

Min 8S + 3M

s.t.

50S + 100M ‰¤ 1200000 funds available

5S + 4M ‰¥ 60000 Annual incomes

M ‰¥ 3000 Units in money market

S, M ‰¥ 0

The computer solution is shown in Figure 3.16.

a. What is the optimal solution, and what is the minimum total risk?

b. Specify the objective coefficient ranges.

c. How much annual income will be earned by the portfolio?

d. What is the rate of return for the portfolio?

e. What is the dual value for the funds available constraint?

f. What is the marginal rate of return on extra funds added to the portfolio?

Figure 3.16

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**Related Book For**

## An Introduction To Management Science Quantitative Approaches To Decision Making

**ISBN:** 1098

14th Edition

**Authors:** David R. Anderson, Dennis J. Sweeney, Thomas A. Williams, Jeffrey D. Camm, James J. Cochran