Question

Blair & Rosen, Inc. (B&R) is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who contacted B&R this past week has a maximum of $55,000 to invest. B&R's investment advisor decides to recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 17%, while the Blue Chip fund has a projected annual return of 8%. The investment advisor requires that at most $25,000 of the client's funds should be invested in the Internet fund. B&R services include a risk rating for each investment alternative. The Internet fund, which is the more risky of the two investment alternatives, has a risk rating of 5 per thousand dollars invested. The Blue Chip fund has a risk rating of 4 per thousand dollars invested. For example, if $10,000 is invested in each of the two investment funds, B&R's risk rating for the portfolio would be 5(10) + 5(10) = 100. Finally, B&R developed a questionnaire to measure each client's risk tolerance. Based on the responses, each client is classified as a conservative, moderate, or aggressive investor. Suppose that the questionnaire results classified the current client as a moderate investor. B&R recommends that a client who is a moderate investor limit his or her portfolio to a maximum risk rating of 240.

(a)	Formulate a linear programming model to find the best investment strategy for this client.
	Let I = Internet fund investment in thousands B = Blue Chip fund investment in thousands
	If required, round your answers to two decimal places.
	- Select your answer Max I + B s.t. 0.17I +    B ≤ 55 1I + 1B ≤ (?)Maximum investment in the internet fund (?)I + (?)B ≤ 240 I, B ≤ 0
(b)	Build a spreadsheet model and solve the problem using Solver. What is the recommended investment portfolio for this client?
	Internet Fund =    $ Blue Chip Fund = $
	What is the annual return for the portfolio?
	$
(c)	Suppose that a second client with $55,000 to invest has been classified as an aggressive investor. B&R recommends that the maximum portfolio risk rating for an aggressive investor is 350. What is the recommended investment portfolio for this aggressive investor?
	Internet Fund =    $ Blue Chip Fund = $ Annual Return = $
(d)	Suppose that a third client with $55,000 to invest has been classified as a conservative investor. B&R recommends that the maximum portfolio risk rating for a conservative investor is 150. Develop the recommended investment portfolio for the conservative investor.
	Internet Fund =    $ ?Blue Chip Fund = $ Annual Return = $

Answer 1

*****Please please please LIKE THIS ANSWER, so that I can get a small benefit, Please*****

(a) Formulation:

Maximize = 0.17I + 0.08B (annual return)

Subject to,

I + B < = 55,000 (maximum investment amount)

I <= 25,000 (Internet Investment Fund)

0.005I + 0.004B <= 240 (risk raking)

I,B >= 0

(b) Solution

Formulae:

Solver Parameters:

(c) Solution

(d) Solution

*****Please please please LIKE THIS ANSWER, so that I can get a small benefit, Please*****