Investment decision using LPP
Not what you're looking for?
(Investment decision problem) 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:
a.) Municipal bonds should constitute at least 20% of the investment.
b.) At least 40% of the funds should be placed in a combination of electronic firms, aerospace firms, and drug manufacturers.
c.) 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:
PROJECTED RATE
INVESTMENT 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
a.) Formulate this portfolio selection problem using LP.
b.) Solve this problem.
Purchase this Solution
Solution Summary
The solution illustrates the application of linear programming in an investment decision problem.
Purchase this Solution
Free BrainMass Quizzes
Probability Quiz
Some questions on probability
Exponential Expressions
In this quiz, you will have a chance to practice basic terminology of exponential expressions and how to evaluate them.
Graphs and Functions
This quiz helps you easily identify a function and test your understanding of ranges, domains , function inverses and transformations.
Solving quadratic inequalities
This quiz test you on how well you are familiar with solving quadratic inequalities.
Multiplying Complex Numbers
This is a short quiz to check your understanding of multiplication of complex numbers in rectangular form.