Stock in Company A sells for $86 a share and has a 3-year average annual return of $25 a share. The beta value is 1.21. Stock in Company B sells for $82 a share and has a 3-year average annual return of $18 a share. The beta value is 1.07. Derek wants to spend no more than $17,000 investing in these two stocks, but he wants to earn at least $2100 in annual revenue. Derek also wants to minimize the risk. Determine the number of shares of each stock that Derek should buy Set up the linear programming problem. Let a represent the number of shares of stock in Company A, b represent the number of shares of stock in Company B, and z represent the total beta value subject to z= 86a+82b 25a+18b a≥0, b≥0. (Use integers or decimals for any numbers in the expressions. Do not include the $ symbol in your answers.)
Stock in Company A sells for $86 a share and has a 3-year average annual return of $25 a share. The beta value is 1.21. Stock in Company B sells for $82 a share and has a 3-year average annual return of $18 a share. The beta value is 1.07. Derek wants to spend no more than $17,000 investing in these two stocks, but he wants to earn at least $2100 in annual revenue. Derek also wants to minimize the risk. Determine the number of shares of each stock that Derek should buy Set up the linear programming problem. Let a represent the number of shares of stock in Company A, b represent the number of shares of stock in Company B, and z represent the total beta value subject to z= 86a+82b 25a+18b a≥0, b≥0. (Use integers or decimals for any numbers in the expressions. Do not include the $ symbol in your answers.)
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
Problem 1PS
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Transcribed Image Text:Stock in Company A sells for $86 a share and has a 3-year average annual return of $25 a share. The beta value is 1.21. Stock in Company B sells for $82 a share and has a 3-year average annual return of $18
a share. The beta value is 1.07. Derek wants to spend no more than $17,000 investing in these two stocks, but he wants to earn at least $2100 in annual revenue. Derek also wants to minimize the risk. Determine
the number of shares of each stock that Derek should buy
Set up the linear programming problem. Let a represent the number of shares of stock in Company A, b represent the number of shares of stock in Company B, and z represent the total beta value
subject to
z=
86a+82b
25a+18b
a≥0, b≥0.
(Use integers or decimals for any numbers in the expressions. Do not include the $ symbol in your answers.)
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