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An investor is looking to invest R 250,000 with the intent of getting the highest possible return. He plans to do this by holding a diverse stock portfolio with different hypothetical stocks with varying expected returns as seen in the table below. Stock Naspers Sasol ABSA Capitec Return earned 6% 15% 9 3% To control for risk, the following constraints are put into place: a) No more than 15% of the total investment can be put into ABSA stocks. b) At most 40% must be invested in Sasol stocks and the Capitec stocks combined. c) The amount put in Naspers stocks must be no more than the amount invested into all the other remaining stocks combined. d) All the R250,000 must be invested and no shorting is allowed. Formulate a linear programming model for this problem to get the highest return (i.e., Define and outline your decision variables, objective function and constraints). How much of the budget should be invested into each investment option? (Show your workings in Microsoft Excel)

An investor is looking to invest R 250,000 with the intent of getting the highest possible return. He plans to do this by holding a diverse stock portfolio with different hypothetical stocks with varying expected returns as seen in the table below. Stock Naspers Sasol ABSA Capitec Return earned 6% 15% 9 3% To control for risk, the following constraints are put into place: a) No more than 15% of the total investment can be put into ABSA stocks. b) At most 40% must be invested in Sasol stocks and the Capitec stocks combined. c) The amount put in Naspers stocks must be no more than the amount invested into all the other remaining stocks combined. d) All the R250,000 must be invested and no shorting is allowed. Formulate a linear programming model for this problem to get the highest return (i.e., Define and outline your decision variables, objective function and constraints). How much of the budget should be invested into each investment option? (Show your workings in Microsoft Excel)

Essentials Of Investments
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
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An investor is looking to invest R 250,000 with the intent of getting the highest possible return. He plans to do this by holding a diverse stock portfolio with different hypothetical stocks with varying expected returns as seen in the table below. Stock Return earned Naspers 6% Sasol 15% ABSA Capitec 3% To control for risk, the following constraints are put into place: a) No more than 15% of the total investment can be put into ABSA stocks. b) At most 40% must be invested in Sasol stocks and the Capitec stocks combined. c) The amount put in Naspers stocks must be no more than the amount invested into all the other remaining stocks combined. d) All the R250,000 must be invested and no shorting is allowed. Formulate a linear programming model for this problem to get the highest return (i.e., Define and outline your decision variables, objective function and constraints). How much of the budget should be invested into each investment option? (Show your workings in Microsoft Excel)
Transcribed Image Text:An investor is looking to invest R 250,000 with the intent of getting the highest possible return. He plans to do this by holding a diverse stock portfolio with different hypothetical stocks with varying expected returns as seen in the table below. Stock Return earned Naspers 6% Sasol 15% ABSA Capitec 3% To control for risk, the following constraints are put into place: a) No more than 15% of the total investment can be put into ABSA stocks. b) At most 40% must be invested in Sasol stocks and the Capitec stocks combined. c) The amount put in Naspers stocks must be no more than the amount invested into all the other remaining stocks combined. d) All the R250,000 must be invested and no shorting is allowed. Formulate a linear programming model for this problem to get the highest return (i.e., Define and outline your decision variables, objective function and constraints). How much of the budget should be invested into each investment option? (Show your workings in Microsoft Excel)
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