Activity: Financial Analyst, Inc., is an investment firm that manages stock portfolios for a number of clients. A new client is requesting that the firm handle an $ 800,000 portfolio. As an initial investment strategy, the client would like to restrict the portfolio to a mix of the following two stocks: Stock Price/Share Maximum Estimated Possible Annual Return / Share Investment Oil Alaska $50 $6 $500,000 Southwest $30 $4 $450,000 Petroleum Let: X = number of shares of Oil Alaska y = number of shares of Southwest Petroleum a. Develop the objective function, assuming that the client desires to maximize the total annual return. b. Show the mathematical expressions for each of the following constraints:
Activity: Financial Analyst, Inc., is an investment firm that manages stock portfolios for a number of clients. A new client is requesting that the firm handle an $ 800,000 portfolio. As an initial investment strategy, the client would like to restrict the portfolio to a mix of the following two stocks: Stock Price/Share Maximum Estimated Possible Annual Return / Share Investment Oil Alaska $50 $6 $500,000 Southwest $30 $4 $450,000 Petroleum Let: X = number of shares of Oil Alaska y = number of shares of Southwest Petroleum a. Develop the objective function, assuming that the client desires to maximize the total annual return. b. Show the mathematical expressions for each of the following constraints:
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:Activity:
Financial Analyst, Inc., is an investment firm that manages stock portfolios for a number of clients.
A new client is requesting that the firm handle an $ 800,000 portfolio. As an initial investment
strategy, the client would like to restrict the portfolio to a mix of the following two stocks:
Stock
Price/Share
Maximum Estimated
Possible
Annual Return /Share
Investment
Oil Alaska
$50
$6
$500,000
Southwest
$30
$4
$450,000
Petroleum
Let:
X = number of shares of Oil Alaska
y = number of shares of Southwest Petroleum
a. Develop the objective function, assuming that the client desires to maximize the total annual
return.
b. Show the mathematical expressions for each of the following constraints:
a. Total investment funds available are $800,000.
b. Maximum Oil Alaska investment is $500,000
c. Maximum Southwest Petroleum investment is $450,000
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