Question: WE HAVE TO RESOLVE IT IN SOLVER (EXCEL EXTENSION) ! 5.4.3 Financial Portfolio Problem Definition. In your finance courses, you will learn a number of

WE HAVE TO RESOLVE IT IN SOLVER (EXCEL EXTENSION) !

WE HAVE TO RESOLVE IT IN SOLVER (EXCEL EXTENSION)

5.4.3 Financial Portfolio Problem Definition. In your finance courses, you will learn a number of techniques for creating "optimal" portfolios. The optimality of a portfolio depends heavily on the model used for defining risk and other aspects of financial instruments. Here is a particularly simple model that is amenable to linear programming techniques. Consider a mortgage team with $100,000,000 to finance various investments. There are five categories of loans, each with an associated return and risk (1-10, 1 best): 68 CHAPTER 5. MODELING WITH LINEAR PROGRAMMING Any uninvested money goes into a savings account with no risk and 3\% return. The goal for the mortgage team is to allocate the money to the categories so as to: (a) Maximize the average return per dollar (b) Have an average risk of no more than 5 (all averages and fractions taken over the invested money (not over the saving account)). (c) Invest at least 20% in commercial loans (d) The amount in second mortgages and personal loans combined should be no higher than the amount in first mortgages

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