Q.A portfolio manager is trying to balance investments between bonds, stocks and cash. The return on bonds is 9 percent, 12 percent on stocks, and 3 percent on cash. The total portfolio is $1 billion, and he or she must keep 10 percent in cash in accordance with company policy. The fund's prospectus promises that stocks cannot exceed 75 percent of the portfolio. Solve this investment decision as a linear programming problem. Download the Answer Report 9% 12% 3% Balance Totoal profit r S C Total Port $1billion Cash accord cant exceed Contraints 10% 75% of port 9% O x1 x2 12% B 3% LHS . . RHS 1,000,000,000 10% 75%

Q.A portfolio manager is trying to balance investments between bonds, stocks and cash. The return on bonds is 9 percent, 12 percent on stocks, and 3 percent on cash. The total portfolio is $1 billion, and he or she must keep 10 percent in cash in accordance with company policy. The fund's prospectus promises that stocks cannot exceed 75 percent of the portfolio. Solve this investment decision as a linear programming problem. Download the Answer Report 9% 12% 3% Balance Totoal profit r S C Total Port $1billion Cash accord cant exceed Contraints 10% 75% of port 9% O x1 x2 12% B 3% LHS . . RHS 1,000,000,000 10% 75%

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Question

Kk. 240.

Q. A portfolio manager is trying to balance investments between bonds, stocks and cash.
The return on bonds is 9 percent, 12 percent on stocks, and 3 percent on cash. The total portfolio is $1 billion, and he or she must keep 10 percent in cash in accordance with company policy.
The fund's prospectus promises that stocks cannot exceed 75 percent of the portfolio.
Solve this investment decision as a linear programming problem. Download the Answer Report
9%
3
1
5
3
4
5 Balance
6
? Totoal profit
B
5
10
11
12
23
24
t
S
C
f
12%
Total Port $1billion
Cash accord
cant exceed
Contraints
3%
10%
75% of port
9%
O
S
xi
x2
x3
12%
C
B
S
3%
LHS
sign RHS
20
CE
1,000,000,000
10%
75%

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Step 1: Define - Linear Programming:

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Step 2: Examine - Objective Functions and Constraints:

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Step 3: Calculate - Maximum Profit:

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Step 4: Calculate - Maximum Profit:

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