The Heinlein and Krampf Brokerage firm has just been instructed by one of its clients to invest $250,000 of her money obtained recently through the sale of land holdings in Ohio. The client has a good deal of trust in the investment house, but she also has her own ideas about the distribution of the funds being invested. In particular, she requests that the firm select whatever stocks and bonds they believe are well rated but within the following guidelines: Municipal bonds should constitute at least 20% of the investment. At least 40% of the funds should be placed in a combination of electronic firms, aerospace firms, and drug manufacturers. No more than 50% of the amount invested in municipal bonds should be placed in a high-risk, high-yield nursing home stock. Subject to these restraints, the client’s goal is to maximize projected return on investments. The analysts at Heinlein and Krampf, aware of these guidelines, prepare a list of high-quality stocks and bonds and their corresponding rates of return: INVESTMENT PROJECTED RATE OF RETURN (%) Los Angeles municipal bonds 5.3 Thompson Electronics, Inc. 6.8 United Aerospace Corp. 4.9 Palmer Drugs 8.4 Happy Days Nursing Homes 11.8 Formulate this portfolio selection problem using LP. Solve this problem.
Contingency Table
A contingency table can be defined as the visual representation of the relationship between two or more categorical variables that can be evaluated and registered. It is a categorical version of the scatterplot, which is used to investigate the linear relationship between two variables. A contingency table is indeed a type of frequency distribution table that displays two variables at the same time.
Binomial Distribution
Binomial is an algebraic expression of the sum or the difference of two terms. Before knowing about binomial distribution, we must know about the binomial theorem.
The Heinlein and Krampf Brokerage firm has just been instructed by one of its clients to invest $250,000 of her money obtained recently through the sale of land holdings in Ohio. The client has a good deal of trust in the investment house, but she also has her own ideas about the distribution of the funds being invested. In particular, she requests that the firm select whatever stocks and bonds they believe are well rated but within the following guidelines:
- Municipal bonds should constitute at least 20% of the investment.
- At least 40% of the funds should be placed in a combination of electronic firms, aerospace firms, and drug manufacturers.
- No more than 50% of the amount invested in municipal bonds should be placed in a high-risk, high-yield nursing home stock.
Subject to these restraints, the client’s goal is to maximize projected return on investments. The analysts at Heinlein and Krampf, aware of these guidelines, prepare a list of high-quality stocks and bonds and their corresponding rates of return:
|
INVESTMENT |
PROJECTED RATE OF RETURN (%) |
|
Los Angeles municipal bonds |
5.3 |
|
Thompson Electronics, Inc. |
6.8 |
|
United Aerospace Corp. |
4.9 |
|
Palmer Drugs |
8.4 |
|
Happy Days Nursing Homes |
11.8 |
- Formulate this portfolio selection problem using LP.
- Solve this problem.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
