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Setting up an investment optimization problem

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Financial Analysts, Inc. is an investment firm that manages stock portfolios for a number of clients. A new client has just requested that the firm handle an $80,000 portfolio. As an initial investment strategy the client would like to restrict the portfolio to a mix of the following two stocks:

Stock: Oil Alaska
Price/share: $50
Estimates annual return/share: $6
Maximum possible investment: $50,000

Stock: Southwest Petroleum
Price/share: $30
Estimates annual return/share: $4
Maximum possible investment: $45,000

Let x = number of shares of Oil Alaska and y = number of shares of Southwest Petroleum

Part A: Develop the objective function, assuming that the client desires to maximize the total annual return
Part B: Show the mathematical expression for each of the following three constraints:
1. Total investment funds available are $80,000
2. Maximum Oil Alaska investment is $50,000
3. Maximum Southwest Petroleum investment is $45,000

Note: this problem only sets up the problem. It does not solve for x and y.

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Solution Summary

This problem sets up an investment optimization problem through a linear programming model. It does not provide a solution.

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