7. Mr. Murty, a retired govt. officer, has recently received his retirement benefits, viz. provident fund, gratuity etc. He is contemplating as to how much funds he should invest in various alternatives open to him so as to maximise returns on investment. The investment alternatives are: government securities, fixed deposits of a public limited company, equity shares, time deposits in banks, national savings certificates and real estate. He has made a subjective estimate of the risk involved. The data on the return of investment, the number of years for which the funds will be blocked to earn this return on investment and the subjective risk involved are as follows: Investment Alternatives Return No. of Years Risk Government securities 6% 15 1 Company Deposits 15% 33 Equity shares 20% 67 Time deposits 10% 31 N.S.C. 12% 61 Real estate 25% 10 2 He was wondering what percentage of funds he should invest in each alternative so as to maximize the return on investment. He decided that average risk should not be more than 4, and funds should not be locked up for more than 15 years. Formulate the LPP and solve, if he does not want more than 30% of the investment to be put in the real estate.
7. Mr. Murty, a retired govt. officer, has recently received his retirement benefits, viz. provident fund, gratuity etc. He is contemplating as to how much funds he should invest in various alternatives open to him so as to maximise returns on investment. The investment alternatives are: government securities, fixed deposits of a public limited company, equity shares, time deposits in banks, national savings certificates and real estate. He has made a subjective estimate of the risk involved. The data on the return of investment, the number of years for which the funds will be blocked to earn this return on investment and the subjective risk involved are as follows: Investment Alternatives Return No. of Years Risk Government securities 6% 15 1 Company Deposits 15% 33 Equity shares 20% 67 Time deposits 10% 31 N.S.C. 12% 61 Real estate 25% 10 2 He was wondering what percentage of funds he should invest in each alternative so as to maximize the return on investment. He decided that average risk should not be more than 4, and funds should not be locked up for more than 15 years. Formulate the LPP and solve, if he does not want more than 30% of the investment to be put in the real estate.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:7. Mr. Murty, a retired govt. officer, has recently received his retirement benefits, viz. provident fund, gratuity etc. He is contemplating as to how much funds he
should invest in various alternatives open to him so as to maximise returns on investment. The investment alternatives are: government securities, fixed deposits of a
public limited company, equity shares, time deposits in banks, national savings certificates and real estate. He has made a subjective estimate of the risk involved. The
data on the return of investment, the number of years for which the funds will be blocked to earn this return on investment and the subjective risk involved are as
follows: Investment Alternatives Return No. of Years Risk Government securities 6% 15 1 Company Deposits 15% 33 Equity shares 20% 67 Time deposits 10% 31
N.S.C. 12% 61 Real estate 25% 10 2 He was wondering what percentage of funds he should invest in each alternative so as to maximize the return on investment.
He decided that average risk should not be more than 4, and funds should not be locked up for more than 15 years. Formulate the LPP and solve, if he does not want
more than 30% of the investment to be put in the real estate.
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