Innis consulting groups investment manager funds for a number of companies and wealthy Clients. The investment strategy is tailored to each client’s needs .For a new clients, Innis has been authorized to invest up to $1.2 million in two investment funds :a stock funds and money market fund. Each unit of the stock fund costs $ 50 and provides an annual rate of return of $5 per dollar invested : :each units of the money market funds cost $100 and provides an annual rate of return $4 for each dollar invested . The clients wants to minimize risks subject to the requirements that the annual income from the investment be at least $60,000.Accoording to Innis’s risks measurements system .each units invested in the stock fund has a risks index of 8,and each units invested in the money market funds has a risks index of 3;the higher risks index associated with the stock funds simply indicated that it is the riskier investment . Inni’s client s also specified that at least $300,000 be invested in the money market funds . Determine how many units of each funds Innis should purchase for the clients to minimize the total risks index for the portfolio How much annual income will this investment strategy generate ? Suppose the clients desire to maximize the annual return. How should be funds be invested? What is the optimal solution, and what is the minimum total risks ? Specify the objectives coefficients ranges. How much annual income will be earned by the portfolio? What is the rate of return for the portfolio? What is the dual value for the fund available constraints? What is the marginal rate of return on extra funds added to the portfolio ? Suppose the risks index for the stock fund (the value of CS)increases from the current value of 8 to 12 . How does the optimal solution change, if at all? Suppose the risks index for the money market fund (the value of CM )increase from its current value of 3 to 3.5. How does the optimal solution change, if at all? Suppose CS increases to 12 And CM increases to 3.5 .How the optimal solution change .If at all?

Innis consulting groups investment manager funds for a number of companies and wealthy Clients. The investment strategy is tailored to each client’s needs .For a new clients, Innis has been authorized to invest up to $1.2 million in two investment funds :a stock funds and money market fund. Each unit of the stock fund costs $ 50 and provides an annual rate of return of $5 per dollar invested : :each units of the money market funds cost $100 and provides an annual rate of return $4 for each dollar invested . The clients wants to minimize risks subject to the requirements that the annual income from the investment be at least $60,000.Accoording to Innis’s risks measurements system .each units invested in the stock fund has a risks index of 8,and each units invested in the money market funds has a risks index of 3;the higher risks index associated with the stock funds simply indicated that it is the riskier investment . Inni’s client s also specified that at least $300,000 be invested in the money market funds . Determine how many units of each funds Innis should purchase for the clients to minimize the total risks index for the portfolio How much annual income will this investment strategy generate ? Suppose the clients desire to maximize the annual return. How should be funds be invested? What is the optimal solution, and what is the minimum total risks ? Specify the objectives coefficients ranges. How much annual income will be earned by the portfolio? What is the rate of return for the portfolio? What is the dual value for the fund available constraints? What is the marginal rate of return on extra funds added to the portfolio ? Suppose the risks index for the stock fund (the value of CS)increases from the current value of 8 to 12 . How does the optimal solution change, if at all? Suppose the risks index for the money market fund (the value of CM )increase from its current value of 3 to 3.5. How does the optimal solution change, if at all? Suppose CS increases to 12 And CM increases to 3.5 .How the optimal solution change .If at all?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Determine how many units of each funds Innis should purchase for the clients to minimize the total risks index for the portfolio
How much annual income will this investment strategy generate ?
Suppose the clients desire to maximize the annual return. How should be funds be invested?
What is the optimal solution, and what is the minimum total risks ?
Specify the objectives coefficients ranges.
How much annual income will be earned by the portfolio?
What is the rate of return for the portfolio?
What is the dual value for the fund available constraints?
What is the marginal rate of return on extra funds added to the portfolio ?
Suppose the risks index for the stock fund (the value of CS)increases from the current value of 8 to 12 . How does the optimal solution change, if at all?
Suppose the risks index for the money market fund (the value of CM )increase from its current value of 3 to 3.5. How does the optimal solution change, if at all?
Suppose CS increases to 12 And CM increases to 3.5 .How the optimal solution change .If at all?

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