An investor is considering three types ofinvestments: a high risk venture into oil leaseswith a potential return of 15%, a medium riskinvestment in bonds with a 9% return, and arelatively safe stock investment with a 5% return.He has $50,000 to invest. Because of the risk, hewill limit his investments in oil leases and bondsto 30% and his investments in oil leases andstock to 50%. How much should he invest ineach to maximize his return, assuminginvestment returns are as expected?a. Define the variablesb. Clearly state the constraints (all inequalities)related to the feasible regionc. State the objective functiond. Set up the initial simplex matrix needed tosolve the linear programming problem using theSimplex Methode. Perform all pivots necessary using rowoperations to transform the matrix until thesolution is feasiblef. How much should he invest in each tomaximize his return, assuming investmentreturns are as expected?

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Answered: An investor is considering three types…

Advanced Engineering Mathematics

10th Edition

ISBN:9780470458365

Author:Erwin Kreyszig

Publisher:Erwin Kreyszig

Chapter2: Second-order Linear Odes

Section: Chapter Questions

Problem 1RQ

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East Coast Athletics is planning to sell its Wilmington, Philadelphia, and Boston gyms. The firm expects to sell its Wilmington gyrn for a cash flow of $A, Its Philadelphia gym for a cash flow of $A, and its Boston gym for a cash flow of $B. The firm expects to sell its Wilmington gym in T years, its Philadelphia gym in 5 years, and its Boston gym in S years. The cost of capital for all three gyms is Y. A > B>0, S > T > 0, and Y> 0. The cash flows from the sales are the only cash flows associated with the various gyms. Based on the information in the preceding paragraph, which one of the following assertions is true? O None of the above assertions is true O The Wilmington gym is the most valuable of the 3 gyms O The Boston gym is the most valuable of the 3 gyms O Two of the three gyms have equal value and those two gyms are more valuable than the third gyms or all three gyms have the same value O The Philadelphia gym is the most valuable of the 3 gyms
A financial manager has to invest $ 200000 in two options, one risky with a return of 20% and second less risky with a return of 10% per year. If the goal is to make $ 32000 at the end of the year what should be distribution of the money in both options.
Elaine Benes is considering three possible ways to invest the $200,000 she has just inherited. Some of Elaine’s friends are considering financing a combined laundromat, video-game arcade, and pizzeria, where the young singles in the area can meet and play while doing their laundry. This venture is highly risky and could result in either a major loss or a substantial gain within a year. Elaine estimates that the chances of losing all the money (i.e. loss of $200,000) are 47%, while the chances of making a $200,000 profit are 53%. Elaine can invest in some new apartments that are being built in town. Within 1 year, this fairly conservative project will produce a profit of at least $10,000, but it might yield $20,000 or even $30,000. Elaine estimates the probabilities of these yields at 20%, 50%, and 30% respectively. Elaine can invest in some private securities that have a current yield of 5%. Construct (draw) a decision tree for Elaine to determine which investment will maximize her…
Sandra has at most $200,000 to invest in stocks, bonds, and money market funds. She expects annual yields of 15%, 10%, and 8%, respectively, on these investments. If Sandra wants at least $50,000 to be invested in money market funds and requires that the amount invested in bonds be greater than or equal to the sum of her investments in stocks and money market funds, determine how much she should invest in each vehicle to maximize the return on her investments. stocks $ bonds $ money market funds $ What is the maximum return?$_______ plz help im lost and have one chance
CGI Inc. is developing a new software platform, which requires an immediate investment of $780,000 and another $260,000 in three years. Net returns expected are $450,000 after two years, $313,000 after four years, and $889,000 after six years. However, if they simply upgrade their current platform, it requires an immediate investment of $400,000, another $260,000 after two years, and $340,000 after four years. Net returns are $187,500 per year for 8 years. The rate of interest is 6.9%. Which project is preferable according to the net present value / IRR criterion?
A large defense contractor is considering making a specialized investment in a facility to make helicopters. The firm currently has a contract with the government, which, over the lifetime of the contract, is worth 100mn euro to the firm. It is considering building a new production plant for these helicopters; doing so will reduce the production costs to the company, increasing the value of the contract from 100mn euro to 200mn euro. The cost of the plant will be 60mn euro. However, there is the possibility that the government will cancel the contract. If that happens, the value of the contract will fall to zero. The problem (from the company’s point of view) is that it will only find out about the cancellation after it completes the new plant. At this point, it appears that the probability that the government will cancel the contract is 0.45. Draw a decision tree reflecting the decisions and find the equilibrium.
An investor wants to exactly replicate the put option's payoff so he considers to buy X shares of the stock and Y shares of bonds. Suppose the stock price is $70 and the bond price with coupon rate 5% is $100. The stock price will either go up 15% or down 8% in one year. There are one European call option and one European put option with exercise price of $70 that will be expired in one year. Short selling is allowed. What are the values of X and Y?
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A person wants to earn the profit of $200,000 from his three goods next year. Product A gives him a profit of $100 and has an expected growth of 10% per year. Product B provides a profit of $200 and has an expected growth of 5% per year. Product C provides a profit of $150 and has an expected growth of 8% per year. The person plans to sell two times of product C as of product B. If the person estimated a total growth of 12% per year in his profits, how many of each product should the person sell in a year? the answer is A: 1931, B: 14, C: 28

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