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FinanceQ&A Library2. The esteemed brokerage firm of Black, Scholes and Merton has just been instructed byone of its clients to invest $250,000 of her money obtained recently through the sale ofNetflix, Inc. The client has a good deal of trust in the brokerage firm, but she also has herown ideas about the distribution of the funds being invested. In particular, she requeststhat the firm select whatever stocks and bonds they believe are well rated, but within thefollowing guidelines:a. Municipal bonds should constitute at least 20% of the investmentb. At least 40% of the funds should be placed in a combination of electronic firms,airline firms and drug manufacturersc. No more than 50% of the amount invested in municipal bonds should be placed in ahigh risk, high yield nursing home stock.Subject to these constraints, the client's goal is to maximize projected return on investment. Thefirm of Black, Scholes and Merton, aware of these guidelines, prepare a list of high-qualitystocks and bonds and their corresponding rates of return:InvestmentProjected Rate of Return (%)Bruderheim municipal bonds5.3SAMU Electronics6.8Westplane AirlinesTrudeau DrugsHappy Days Nursing Homes4.98.411.8Formulate the problem algebraically a linear programming model for this problem.Question

Asked Feb 25, 2020

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Step 1

The question is based on the concept of formulation of linear programming model (LPM). A LPM refers to translating the real-world problem into the form of mathematical equations which could be solved by following steps as

**Step 1:**decide number of decision variables**Step 2: Find the**...

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