Answer in python please. Include bounds and risks.

Database System Concepts
7th Edition
ISBN:9780078022159
Author:Abraham Silberschatz Professor, Henry F. Korth, S. Sudarshan
Publisher:Abraham Silberschatz Professor, Henry F. Korth, S. Sudarshan
Chapter1: Introduction
Section: Chapter Questions
Problem 1PE
icon
Related questions
Question

Answer in python please. Include bounds and risks.

You are the manager of a £100 million portfolio, and you have 6 investment options:
First Mortgages: return 9% and risk score 3
Second Mortgages: return 12% and risk score 6
Personal Loans: return 15% and risk score 8
Commercial Loans: return 8% and risk score 2
Government Securities: return 6% and risk score 1
Saving Account: return 3% and risk score 0
The current regulation requires that the amount allocated in second mortgages and personal
loans (combined) should not exceed the amount allocated in first mortgages.
Given this information:
1. Ignoring the risk involved in the different investment options, what is the profit
maximizing allocation of resources? What are the expected profits?
2.
Now, you have to consider the risk associated with the investments. The average risk of
your portfolio cannot exceed 5. What is the profit maximizing allocation of resources?
What are the expected profits?
The average risk is computed as follows:
Av=Ekrixi
Xi
where: xi is the amount allocated in the investment option i and ri is the risk score of
investment option i.
3. A new legislation is approved, now at least 20% of the money allocated in risky
investments (risk score greater than zero) should be allocated in commercial loans. How
does the new legislation change your optimal allocation? What is the new expected
profit?
Transcribed Image Text:You are the manager of a £100 million portfolio, and you have 6 investment options: First Mortgages: return 9% and risk score 3 Second Mortgages: return 12% and risk score 6 Personal Loans: return 15% and risk score 8 Commercial Loans: return 8% and risk score 2 Government Securities: return 6% and risk score 1 Saving Account: return 3% and risk score 0 The current regulation requires that the amount allocated in second mortgages and personal loans (combined) should not exceed the amount allocated in first mortgages. Given this information: 1. Ignoring the risk involved in the different investment options, what is the profit maximizing allocation of resources? What are the expected profits? 2. Now, you have to consider the risk associated with the investments. The average risk of your portfolio cannot exceed 5. What is the profit maximizing allocation of resources? What are the expected profits? The average risk is computed as follows: Av=Ekrixi Xi where: xi is the amount allocated in the investment option i and ri is the risk score of investment option i. 3. A new legislation is approved, now at least 20% of the money allocated in risky investments (risk score greater than zero) should be allocated in commercial loans. How does the new legislation change your optimal allocation? What is the new expected profit?
Expert Solution
steps

Step by step

Solved in 5 steps with 4 images

Blurred answer
Knowledge Booster
Keywords
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, computer-science and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Database System Concepts
Database System Concepts
Computer Science
ISBN:
9780078022159
Author:
Abraham Silberschatz Professor, Henry F. Korth, S. Sudarshan
Publisher:
McGraw-Hill Education
Starting Out with Python (4th Edition)
Starting Out with Python (4th Edition)
Computer Science
ISBN:
9780134444321
Author:
Tony Gaddis
Publisher:
PEARSON
Digital Fundamentals (11th Edition)
Digital Fundamentals (11th Edition)
Computer Science
ISBN:
9780132737968
Author:
Thomas L. Floyd
Publisher:
PEARSON
C How to Program (8th Edition)
C How to Program (8th Edition)
Computer Science
ISBN:
9780133976892
Author:
Paul J. Deitel, Harvey Deitel
Publisher:
PEARSON
Database Systems: Design, Implementation, & Manag…
Database Systems: Design, Implementation, & Manag…
Computer Science
ISBN:
9781337627900
Author:
Carlos Coronel, Steven Morris
Publisher:
Cengage Learning
Programmable Logic Controllers
Programmable Logic Controllers
Computer Science
ISBN:
9780073373843
Author:
Frank D. Petruzella
Publisher:
McGraw-Hill Education