A person wants to invest $10,000 into stocks: a high tech company (T) with an expected...

A person wants to invest $10,000 into stocks: a high tech company (T) with an expected annual return of 12% and a risk index of 8; and a regulated power company (P) with an expected annual return of 6% and a risk index of 2. To limit risk, the combined portfolio risk must be no more than 6 and the proportion of investment in T must be less than 60%. Find the portfolio that will maximize the annual return R while meeting the risk limitations.

Linear program questions:

1. Formulate the Investment Portfolio problem with the requirement of investing up to $10,000, and solve it graphically.

Compute the increase in annual return if the total investment is increased by $1,000.

Compute the increase in annual return if the constraint of portfolio risk index is increased from 6 to 7.

2. Solve the 3 examples by computer.

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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