A fund manager has P 10 million to invest in treasury bills, bonds, private placements and in risky venture. Relevant information about these various investments are presented below: Investment Yield rate p.a. Maturity Risk rating Treasury Bill 6% 3 months 1 Bonds 8% 5 years 2 Private Placement 12% 6 months 4 Risky Venture 20% 3 years 8 Guidelines given by the fund manager were: 50% of the investment must have a maturity below one year Investment in Risky venture should not exceed 20% of funds invested. At least 30% should be invested in treasury bills. Total investments in items risk rating above 3 should not exceed 40% of total funds invested. Formulate an LP model that would optimize return for this portfolio where X1 = investment in Treasury bills, X2 = investment in bonds, X3 = investment in private placement, X4 = investment in risky venture
A fund manager has P 10 million to invest in treasury bills, bonds, private placements and in risky venture. Relevant information about these various investments are presented below: Investment Yield rate p.a. Maturity Risk rating Treasury Bill 6% 3 months 1 Bonds 8% 5 years 2 Private Placement 12% 6 months 4 Risky Venture 20% 3 years 8 Guidelines given by the fund manager were: 50% of the investment must have a maturity below one year Investment in Risky venture should not exceed 20% of funds invested. At least 30% should be invested in treasury bills. Total investments in items risk rating above 3 should not exceed 40% of total funds invested. Formulate an LP model that would optimize return for this portfolio where X1 = investment in Treasury bills, X2 = investment in bonds, X3 = investment in private placement, X4 = investment in risky venture
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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A fund manager has P 10 million to invest in treasury bills, bonds, private placements and in risky venture. Relevant information about these various investments are presented below:
|
Investment |
Yield rate p.a. |
Maturity |
Risk rating |
|
Treasury Bill |
6% |
3 months |
1 |
|
Bonds |
8% |
5 years |
2 |
|
Private Placement |
12% |
6 months |
4 |
|
Risky Venture |
20% |
3 years |
8 |
Guidelines given by the fund manager were:
- 50% of the investment must have a maturity below one year
- Investment in Risky venture should not exceed 20% of funds invested.
- At least 30% should be invested in treasury bills.
- Total investments in items risk rating above 3 should not exceed 40% of total funds invested.
Formulate an LP model that would optimize return for this portfolio where X1 = investment in Treasury bills, X2 = investment in bonds, X3 = investment in private placement, X4 = investment in risky venture
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