Recall the Innis Investments problem. Letting

S = units purchased in the stock fund

M = units purchased in the money market fund

Leads to the following formulation:

Min8S + 3M

s.t.

50S + 100M ≤ 1,200,000Funds available

5S + 4M ≥ 60,000Annual income

M ≥ 3,000Units in money market

S, M ≥ 0

The computer solution is shown in Figure.

THE MANAGEMENT SCIENTIST SOLUTION FOR THE INNIS INVESTMENTS PROBLEM

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 price for the funds available constraint?
f. What is the marginal rate of return on extra funds added to theportfolio?

Transcribed Image Text:

Objective Function Value- 62000.000 Variable Value Reduced Costs 4000.000 10000.000 0.000 0.000 Constraint Slack/Surplus Dual Prices 0.000 0.000 7000.000 0.057 -2.167 0.000 OBJECTIVE COEFFICIENT RANGES Variable Lower Limit Current Value Upper Limit 3.750 No Lower Limit 8.000 3.000 No Upper Limit 6.400 RIGHT HAND SIDE RANGES Constraint Lower Limit Current Value Upper Linit 780000.000 48000.000 No Lower Limit 1200000.000 60000 000 3000.000 1500000.000 102000.000 10000.000