A mutual fund company has cash resources of birr 200 million for investment in a diversified portfolio. Table below shows the opportunity available, their estimated yields, risk factors and term period of details. Annual yield (%) Risk Factor Time period ( years) Bank deposit 9.5 0.02 6 treasury notes 8.5 0.01 4 corporate deposits 12.0 0.08 3 blue chip stocks 15.0 0.25 5 speculative stocks 32.5 0.45 3 real estates 35.0 0.04 10 Formulate the L.P. model to find the optimal portfolio that will maximize return, considering the following policy guidelines: i) All funds available may be invested ii) Weighted average period of at least 5 years should be the planning horizon iii) Weighted average risk factor must not exceed 0.20 iv) Investment in real estate and speculative stocks together must not be more than 25% of the money invested
A mutual fund company has cash resources of birr 200 million for investment in a diversified portfolio. Table below shows the opportunity available, their estimated yields, risk factors and term period of details. Annual yield (%) Risk Factor Time period ( years) Bank deposit 9.5 0.02 6 treasury notes 8.5 0.01 4 corporate deposits 12.0 0.08 3 blue chip stocks 15.0 0.25 5 speculative stocks 32.5 0.45 3 real estates 35.0 0.04 10 Formulate the L.P. model to find the optimal portfolio that will maximize return, considering the following policy guidelines: i) All funds available may be invested ii) Weighted average period of at least 5 years should be the planning horizon iii) Weighted average risk factor must not exceed 0.20 iv) Investment in real estate and speculative stocks together must not be more than 25% of the money invested
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 mutual fund company has cash resources of birr 200 million for investment in a diversified portfolio. Table below shows the opportunity available, their estimated yields, risk factors and term period of details.
| Annual yield (%) | Risk Factor |
Time period ( years) |
|
| Bank deposit | 9.5 | 0.02 | 6 |
| treasury notes | 8.5 | 0.01 | 4 |
| corporate deposits | 12.0 | 0.08 | 3 |
| blue chip stocks | 15.0 | 0.25 | 5 |
| speculative stocks | 32.5 | 0.45 | 3 |
| real estates | 35.0 | 0.04 | 10 |
Formulate the L.P. model to find the optimal portfolio that will maximize return, considering the following policy guidelines:
i) All funds available may be invested
ii) Weighted average period of at least 5 years should be the planning horizon
iii) Weighted average risk factor must not exceed 0.20
iv) Investment in real estate and speculative stocks together must not be more than 25% of the money invested
Transcribed Image Text:1. A mutual fund company has cash resources of birr 200 million for investment in a
diversified portfolio. Table below shows the opportunity available, their estimated
yields, risk factors and term period of details.
Annual yield (%)
Risk factor
Time period(years)
Bank deposit
Treasury notes
Corporate deposits
Blue chip stocks
Speculative stocks
Real estates
9.5
0.02
8.5
0.01
0.08
4
3
12.0
15.0
32.5
0.25
0.45
35.0
0.04
10
Formulate the L.P. model to find the optimal portfolio that will maximize return,
considering the following policy guidelines:
i)
ii)
iii)
iv)
All funds available may be invested
Weighted average period of at least 5 years should be the planning horizon
Weighted average risk factor must not exceed 0.20
Investment in real estate and speculative stocks together must not be more
than 25% of the money invested
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