8-2 (Investment decision problem) The Heinlein and Krampf Brokerage firm has just been instructed by one of its clients to invest $250,000 of her money obtained recently through the sale of land holdings in Ohio. The client has a good deal of trust in the investment house, but she also has her own ideas about the distribution of the funds being invested. In particular, she requests that the firm select whatever stocks and bonds they believe are well rated but within the following guidelines:Municipal bonds should constitute at least 20% of the investment.At least 40% of the funds should be placed in a combination of electronic firms, aerospace firms, and drug manufacturers.No more than 50% of the amount invested in municipal bonds should be placed in a high-risk, high-yield nursing home stock.Subject to these restraints, the client’s goal is to maximize projected return on investments. The analysts at Heinlein and Krampf, aware of these guidelines, prepare a list of high-quality stocks and bonds and their corresponding rates of return: Perform the four steps (i.e., define variables, determine objective function, identify constraints, list the non-negativity statement) and write equations.

Given that total money for investment=$250,000 Municipal bond→20% of investment Electronic firm +…

Answered: -2 (Investment decision problem) The…

10th Edition

ISBN:9780470458365

Author:Erwin Kreyszig

Publisher:Erwin Kreyszig

Chapter2: Second-order Linear Odes

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8-2

(Investment decision problem) The Heinlein and Krampf Brokerage firm has just been instructed by one of its clients to invest $250,000 of her money obtained recently through the sale of land holdings in Ohio. The client has a good deal of trust in the investment house, but she also has her own ideas about the distribution of the funds being invested. In particular, she requests that the firm select whatever stocks and bonds they believe are well rated but within the following guidelines:

- Municipal bonds should constitute at least 20% of the investment.
- At least 40% of the funds should be placed in a combination of electronic firms, aerospace firms, and drug manufacturers.
- No more than 50% of the amount invested in municipal bonds should be placed in a high-risk, high-yield nursing home stock.

Subject to these restraints, the client’s goal is to maximize projected return on investments. The analysts at Heinlein and Krampf, aware of these guidelines, prepare a list of high-quality stocks and bonds and their corresponding rates of return: Perform the four steps (i.e., define variables, determine objective function, identify constraints, list the non-negativity statement) and write equations.

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