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)
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)
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter9: Decision Making Under Uncertainty
Section9.3: Single-stage Decision Problems
Problem 5P
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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
9.
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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