You have a total of £10,000 to invest in three different funds - Rolls-Royce, C&J and stock exchange. The expected return and risk level for each of the fund is given in the below table:

To minimize your risk across the three funds you decide to invest at least twice as much in Rolls-Royce as you invest in C&G. You also decide that as the stock exchange is considered a high-risk fund, to limit the amount you invest in this fund to £2000. 

Taking account of your decisions to minimize the risk, produce a model, and determine the optimal amount to invest in each of the three funds so as to maximize the expected return? 

What does your solution tell you about the problem?

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Fund Expected Return Risk Level Rolls-Royce 6% Low C&G 7% Medium stock exchange 10% High Fund Expected Return Risk Level Rolls-Royce 6% Low C&G 7% Medium stock exchange 10% High