A private investor has no more than $10,000 to purchase common stocks in two companies in the financial sector. After reading many analyst's reports on the two companies, she estimates the chance of a 1% loss on her capital investment in Company A and the chance of a 4% loss on her capital investment in Company B, and she has decided that she cannot afford to lose more than $2000. However, from her analysis, she expects to make a 14% profit from her investment in Company A and a 20% profit from her investment in Company B. To maximize total returns on loans made by the bank, P, state the objective function using A and B to represent the two companies, respectively. P=0.144 +0.20B P = 0.014 + 0.04B P=A+B P=0.044 +0.01B
A private investor has no more than $10,000 to purchase common stocks in two companies in the financial sector. After reading many analyst's reports on the two companies, she estimates the chance of a 1% loss on her capital investment in Company A and the chance of a 4% loss on her capital investment in Company B, and she has decided that she cannot afford to lose more than $2000. However, from her analysis, she expects to make a 14% profit from her investment in Company A and a 20% profit from her investment in Company B. To maximize total returns on loans made by the bank, P, state the objective function using A and B to represent the two companies, respectively. P=0.144 +0.20B P = 0.014 + 0.04B P=A+B P=0.044 +0.01B
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:A private investor has no more than $10,000 to purchase common stocks in two companies in the financial sector. After reading many analyst's reports on the
two companies, she estimates the chance of a 1% loss on her capital investment in Company A and the chance of a 4% loss on her capital investment in
Company B, and she has decided that she cannot afford to lose more than $2000. However, from her analysis, she expects to make a 14% profit from her
investment in Company A and a 20% profit from her investment in Company B. To maximize total returns on loans made by the bank, P, state the objective
function using A and B to represent the two companies, respectively.
OP=0.144 +0.20B
OP=0.014 + 0.04B
OP= A + B
OP=0.044 +0.01B
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