Operations Research : Applications and Algorithms
Operations Research : Applications and Algorithms
4th Edition
ISBN: 9780534380588
Author: Wayne L. Winston
Publisher: Brooks Cole
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Chapter 3.8, Problem 9P

Explanation of Solution

 Formulation of a Linear Programming (LP) to maximize the expected return on its investment:

 From the given information, let consider “x1” bet the amount of money invested in bond 1, “x2” bet the amount of money invested in bond 2, “x3” bet the amount of money invested in bond 3, “x4” bet the amount of money invested in bond 4.

 The objective is to maximize the expected return on its investments.

 z=((percentage of expected annual return on bond 1)(the amount of money invested in bond 1)+(percentage of expected annual return on bond 2)(the amount of money invested in bond 2)+(percentage of expected annual return on bond 3)(the amount of money invested in bond 3)+(percentage of expected annual return on bond 4)(the amount of money invested in bond 4))=0.13x1+0.08x2+0.12x3+0.14x4

 Therefore, the objective function is,

 Maximize z=0.13x1+0.08x2+0.12x3+0.14x4

 Constraint 1:

 At least, 8% must be the worst-case return of the bond portfolio.

 ((percentage of the worst-case annual return on each bond)×(amount of money invested in each bond))10000000.8%0.06x1+0.08x2+0.10x3+0.09x40.08(1000000)0.06x1+0.08x2+0.10x3+0.09x480000

 Constraint 2:

 At most, the average duration of the bond portfolio must be 6

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Chapter 3 Solutions

Operations Research : Applications and Algorithms

Ch. 3.2 - Prob. 6PCh. 3.3 - Prob. 1PCh. 3.3 - Prob. 2PCh. 3.3 - Prob. 3PCh. 3.3 - Prob. 4PCh. 3.3 - Prob. 5PCh. 3.3 - Prob. 6PCh. 3.3 - Prob. 7PCh. 3.3 - Prob. 8PCh. 3.3 - Prob. 9PCh. 3.3 - Prob. 10PCh. 3.4 - Prob. 1PCh. 3.4 - Prob. 2PCh. 3.4 - Prob. 3PCh. 3.4 - Prob. 4PCh. 3.5 - Prob. 1PCh. 3.5 - Prob. 2PCh. 3.5 - Prob. 3PCh. 3.5 - Prob. 4PCh. 3.5 - Prob. 5PCh. 3.5 - Prob. 6PCh. 3.5 - Prob. 7PCh. 3.6 - Prob. 1PCh. 3.6 - Prob. 2PCh. 3.6 - Prob. 3PCh. 3.6 - Prob. 4PCh. 3.6 - Prob. 5PCh. 3.7 - Prob. 1PCh. 3.8 - Prob. 1PCh. 3.8 - Prob. 2PCh. 3.8 - Prob. 3PCh. 3.8 - Prob. 4PCh. 3.8 - Prob. 5PCh. 3.8 - Prob. 6PCh. 3.8 - Prob. 7PCh. 3.8 - Prob. 8PCh. 3.8 - Prob. 9PCh. 3.8 - Prob. 10PCh. 3.8 - Prob. 11PCh. 3.8 - Prob. 12PCh. 3.8 - Prob. 13PCh. 3.8 - Prob. 14PCh. 3.9 - Prob. 1PCh. 3.9 - Prob. 2PCh. 3.9 - Prob. 3PCh. 3.9 - Prob. 4PCh. 3.9 - Prob. 5PCh. 3.9 - Prob. 6PCh. 3.9 - Prob. 7PCh. 3.9 - Prob. 8PCh. 3.9 - Prob. 9PCh. 3.9 - Prob. 10PCh. 3.9 - Prob. 11PCh. 3.9 - Prob. 12PCh. 3.9 - Prob. 13PCh. 3.9 - Prob. 14PCh. 3.10 - Prob. 1PCh. 3.10 - Prob. 2PCh. 3.10 - Prob. 3PCh. 3.10 - Prob. 4PCh. 3.10 - Prob. 5PCh. 3.10 - Prob. 6PCh. 3.10 - Prob. 7PCh. 3.10 - Prob. 8PCh. 3.10 - Prob. 9PCh. 3.11 - Prob. 1PCh. 3.11 - Show that Finco’s objective function may also be...Ch. 3.11 - Prob. 3PCh. 3.11 - Prob. 4PCh. 3.11 - Prob. 7PCh. 3.11 - Prob. 8PCh. 3.11 - Prob. 9PCh. 3.12 - Prob. 2PCh. 3.12 - Prob. 3PCh. 3.12 - Prob. 4PCh. 3 - Prob. 1RPCh. 3 - Prob. 2RPCh. 3 - Prob. 3RPCh. 3 - Prob. 4RPCh. 3 - Prob. 5RPCh. 3 - Prob. 6RPCh. 3 - Prob. 7RPCh. 3 - Prob. 8RPCh. 3 - Prob. 9RPCh. 3 - Prob. 10RPCh. 3 - Prob. 11RPCh. 3 - Prob. 12RPCh. 3 - Prob. 13RPCh. 3 - Prob. 14RPCh. 3 - Prob. 15RPCh. 3 - Prob. 16RPCh. 3 - Prob. 17RPCh. 3 - Prob. 18RPCh. 3 - Prob. 19RPCh. 3 - Prob. 20RPCh. 3 - Prob. 21RPCh. 3 - Prob. 22RPCh. 3 - Prob. 23RPCh. 3 - Prob. 24RPCh. 3 - Prob. 25RPCh. 3 - Prob. 26RPCh. 3 - Prob. 27RPCh. 3 - Prob. 28RPCh. 3 - Prob. 29RPCh. 3 - Prob. 30RPCh. 3 - Graphically find all solutions to the following...Ch. 3 - Prob. 32RPCh. 3 - Prob. 33RPCh. 3 - Prob. 34RPCh. 3 - Prob. 35RPCh. 3 - Prob. 36RPCh. 3 - Prob. 37RPCh. 3 - Prob. 38RPCh. 3 - Prob. 39RPCh. 3 - Prob. 40RPCh. 3 - Prob. 41RPCh. 3 - Prob. 42RPCh. 3 - Prob. 43RPCh. 3 - Prob. 44RPCh. 3 - Prob. 45RPCh. 3 - Prob. 46RPCh. 3 - Prob. 47RPCh. 3 - Prob. 48RPCh. 3 - Prob. 49RPCh. 3 - Prob. 50RPCh. 3 - Prob. 51RPCh. 3 - Prob. 52RPCh. 3 - Prob. 53RPCh. 3 - Prob. 54RPCh. 3 - Prob. 56RPCh. 3 - Prob. 57RPCh. 3 - Prob. 58RPCh. 3 - Prob. 59RPCh. 3 - Prob. 60RPCh. 3 - Prob. 61RPCh. 3 - Prob. 62RPCh. 3 - Prob. 63RP
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