An invester has up to $250,000 to inveest in three types of investments. Type A pays 8% annually and has a risk factor of 0. Tupe B pays 10% annually and has a risk factor of 0.06. Type C pays 14% annually and has a risk factor of 0.10. to have a well-balanced potfolio, the investor imposes the following conditions. The average risk factor should be no greater than 0.05. Moreover, at least one-fourth of the total portfolio is to be allocated to type A investments ans at least one-fourth of the portfolio to be allocated to type B investments. How much should be allocated to each type of investment to obtain a maximum return? Use simplex method to solve this.
An invester has up to $250,000 to inveest in three types of investments. Type A pays 8% annually and has a risk factor of 0. Tupe B pays 10% annually and has a risk factor of 0.06. Type C pays 14% annually and has a risk factor of 0.10. to have a well-balanced potfolio, the investor imposes the following conditions. The average risk factor should be no greater than 0.05. Moreover, at least one-fourth of the total portfolio is to be allocated to type A investments ans at least one-fourth of the portfolio to be allocated to type B investments. How much should be allocated to each type of investment to obtain a maximum return? Use simplex method to solve this.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An invester has up to $250,000 to inveest in three types of investments. Type A pays 8% annually and has a risk factor of 0. Tupe B pays 10% annually and has a risk factor of 0.06. Type C pays 14% annually and has a risk factor of 0.10. to have a well-balanced potfolio, the investor imposes the following conditions. The average risk factor should be no greater than 0.05. Moreover, at least one-fourth of the total portfolio is to be allocated to type A investments ans at least one-fourth of the portfolio to be allocated to type B investments. How much should be allocated to each type of investment to obtain a maximum return? Use simplex method to solve this.
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