Question:

1. (30% of the grade) Can you methodically decompose any business optimization problem into: i. decision variables ii. objective function iii. constraints 2. (15% of the grade) Can you express these above three components i. verbally ii. mathematically iii. in a spreadsheet 3. (20% of the grade) How do you identify the correct type of methodology to employ to develop a solution? 4. (20% of the grade) Can you interpret the results of Excel Solver output using simple words that your clients and managers can understand?

Stock Selection Case Study Markowilz won the Nobel Prize for his work in stock portfolio theolv. He was the rst to measure portfolio risk using the variance of retums.l He introduced stock selection based on an \"efficient frontier\Similarly, Markowiiz showed that the portfolio's variance is the following function of covariances: V = 0.0146xlxl + 001871512 + 0.0'14515113 + 0.0187x2x1 + 0.0854x2x2 + 0.0104x2x3 + 0.0145x3x1 + [10104th + 0.0289x3x3 . You are asked to create a spreadsheet model to develop an optimal feasible solution of the investment portfolio to present to the investor. Your solution should inform the investor how she should proportion her investments across the three stocks in her poltfolio. In your final writeup, please make sure to identify the decision variables, the objective function, and the constraints. Describe whether any of the constraints are integer and binary? Describe the methodology used to develop the solution and identify whether your solution is an optimal feasible solution or a feasible solution? Howr did you know your solution was optimal or not? Did you have to make a Solver selection to ensure you solution was optimal? Finally, explain the investment solution you have developed for the investor and whether your solution meets her portfolio criteria of risk and return