QUESTION 14

1. Use the table below to answer the following question(s). Qualis Investments is a private limited business that manages personal financial portfolios. The company manages six mutual funds and has a client that has acquired $750,000 from an inheritance. Characteristics of the funds are given in the table below.

   	Qualis Mutual Fund Data
   		Expected Annual Return	Risk Measure
   1	Qualis Low-priced Stock Fund	7.23%	11.87
   2	Qualis Multinational Fund	8.42%	12.62
   3	Qualis Mid-cap Stock Fund	6.66%	13.72
   4	Qualis Mortgage Fund	2.72%	3.37
   5	Qualis Income Equity Fund	8.89%	8.4
   6	Qualis Balanced Fund	3.50%	6.91

   The company recommends that no more than $300,000 be invested in any individual fund, and that at least $80,000 be invested in each of the mid-cap stock and mortgage fund. The total amount invested in the low-priced and multinational funds are at least 35% of the total investment. The client would like an average return of at least 6%. Assume that X1- X6 represent the dollar amounts invested in funds 1 through 6, respectively. Which of the following is the constraint for the weighted return?

   		7.23 X1 + 8.42 X2 + 6.66 .X3 + 2.72 X4 + 8.89 X5 + 3.5 X6 6.00
   		X1 + X2 + X3 + X4 + X5 + X6 = 750,000
   		( 7.23 X1 + 8.42 X2 + 6.66 .X3 + 2.72 X4 + 8.89 X5 + 3.5 X6 ) / 750,000
   		( 7.23 X1 + 8.42 X2 + 6.66 .X3 + 2.72 X4 + 8.89 X5 + 3.5 X6 ) / 750,000 6.00