Rachael Smith wishes to invest her inheritance of $100,000 so that her return on investment is maximized,
Question:
Rachael Smith wishes to invest her inheritance of $100,000 so that her return on investment is maximized, but she also wishes to keep her risk level relatively low. She has decided to invest her money in any of three possible ways: CDs, which pay a guaranteed 8 percent; stocks, which have an expected return of 12 percent; and a money market mutual fund, which is expected to return 10 percent. She has decided that the total $100,000 will be invested, but any part (or all) of it may be put in any of the three alternatives. Thus, she may have some money invested in all three alternatives. In formulating this as a linear programming problem, define the variables as follows: C = dollars invested in CDs S = dollars invested in stocks M = dollars invested in money market mutual fund. What would the objective function be in this investment problem?
Maximize 0.30C + 0.30S + 0.30M | ||
Minimize C + S + M | ||
Maximize 100000(C + S + M) | ||
Maximize 0.08C + 0.12S + 0.10M |
Fundamentals Of Investing
ISBN: 9780135175217
14th Edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk