Assuming that Frank will invest all $100,000, develop a linear programming model to determine the amount to be invested in each products so that the total risk will be minimized while meeting the four portfolio goals, by a) first write out the complete formulation, b) then use Excel Solver to find the solution.

(Hints: Risk is calculated by amount invested on a product multiplied by its associated risk factor; for example, if $100 is invested in Atlantic Lighting, then its associated risk is 100 x 25=2500.)

2. Reformulate the problem so that the objective is to maximize the expected return while keeping total risk less than or equal to 1,500,000 and the three remaining portfolio goals, and use Solver to find the solution.

Charles Jones in a fimancial advisor who specialines in making recommendations to investors who have recently come into unexpected sums of money from inheri- tances, lottery winnings, and the like. He discasses investment goals with his Esport F clients, taking into account each client's attitude toward risk and liquidity Afer an initial consulation with a client, Charles sclects agroup of stock, for consideration in the portfolio. He then secures information on each bonds, mutual funds, savings plans, andoher investments that h' relsmaybeap. investment and determines his own rating. With this information he develops chart giving the risk factors (numbers between 0 and 100, based on his evaluation) expected returns based on current and projected company operations, and liquid- ity information. At the second meeting Charles defines the clients goals more specifically. The responses are entered into a linear programming model, and a Organia recommendation is made to the client based on the results of the model Frank Baklara has just inherited S100,000. Based on their initial meeting Charles has found Frank to be quite risk-averse. Charles, therefore, suggests the following potential invesements that can offer good returns with small risk Expected Joner's Ligwidiy Rik L Send to +Send & More To Potential Certificate of deposit Arkansas REIT Bedrock Insurance muity 40% A Inanediate 0 5.2% 7.1% B+ Immediate 25 10.0% B Inmediate 30 82% 6.5% A 5-ear A B+ 1-year 1-year Nocal Mining bond 20.0% A Immediate 65 12.5% C bnmediano 40 Based on their second eeting, Charles has been able to help Frank develop the following portfolio gosls L An expected annual return of at least 75% 2. At least 50% ofthc inheritance in A-nted investments 3. At least 40% ofthc inheritance in mmediately liquid iavestments No more chan $30,000 in savings accounts and cerificanes of deposit Put en RCH-030 Ho 852