Essentials Of Business Analytics
1st Edition
ISBN: 9781285187273
Author: Camm, Jeff.
Publisher: Cengage Learning,
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 8, Problem 3P
Blair & Rosen. Inc. (B&R) is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who contacted B&R this past week has a maximum of $50,000 to invest. B&R’s investment advisor decides to recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 12%, and the Blue Chip fund has a projected annual return of 9%. The investment advisor requires that at most $35,000 of the client’s funds should be invested in the Internet fund. B&R services include a risk rating for each investment alternative. The Internet fund, which is the more risky of the two investment alternatives, has a risk rating of 6 per $1,000 invested. The Blue Chip fund has a risk rating of 4 per $1,000 invested. For example, if $10,000 is invested in each of the two investment funds, B&R’s risk rating for the portfolio would be 6(10) + 4(10) = 100. Finally. B&R developed a questionnaire to measure each client’s risk tolerance. Based on the responses, each client is classified as a conservative, moderate, or aggressive investor. Suppose that the questionnaire results classified the current client as a moderate investor. B&R recommends that a client who is a moderate investor limit his or her portfolio to a maximum risk rating of 240.
- a. Formulate a linear programming model to find the best investment strategy for this client.
- b. Build a spreadsheet model and solve the problem using Solver. What is the recommended investment portfolio for this client? What is the annual return for the portfolio?
- c. Suppose that a second client with $50,000 to invest has been classified as an aggressive investor. B&R recommends that the maximum portfolio risk rating for an aggressive investor is 320. What is the recommended investment portfolio for this aggressive investor?
- d. Suppose that a third client with $50,000 to invest has been classified as a conservative investor. B&R recommends that the maximum portfolio risk rating for a conservative investor is 160. Develop the recommended investment portfolio for the conservative investor.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Ashley has earmarked at most $550,000 for investment in three mutual funds: a money market fund, an international equity fund, and a growth-and-income fund. The money market fund has a rate of return of 6%/year, the international equity fund has a rate of return of 10%/year, and the growth-and-income fund has a rate of return of 15%/year. Ashley has stipulated that no more than 25% of her total portfolio should be in the growth-and-income fund and that no more than 50% of her total portfolio should be in the international equity fund. To maximize the return on her investment, how much should Ashley invest in each type of fund?
money market fund
$
international equity fund
$
growth-and-income fund
$
What is the maximum return?$
First Securities, Inc., an investment firm, has $380,000 on account. The chief investment officer would like to reinvest the $380,000 in a portfolio that would maximize return on investment while at the same time maintaining a relatively conservative mix of stocks and bonds. The following table shows the investment opportunities and rates of return.
Investment Opportunity
Rate of Return
Municipal Bonds (X1)
0.095
High Tech Stock (X2)
0.146
Blue Chip Stock (X3)
0.075
Federal Bonds (X4)
0.070
a) The Board of Directors has mandated that at least 60 percent of the investment consist of a combination of municipal and federal bonds, at least 25 percent Blue Chip Stock, no more than 30 percent High Tech and Blue Chip Stock, and no more than 15 percent High Tech Stock.
Based on above problem, how many constraints are in this problem?
A) 3
B) 4
C) 5
D) 2
b) Based on part a, which of the…
Given that sales volumes are forecast to stay steady at 2,000,000 units, the best option is _________________.
Group of answer choices
1. Manual Production Line
2. Semi-automatic Production Line
3. Fully Automatic Production Line
Chapter 8 Solutions
Essentials Of Business Analytics
Ch. 8 - Kelson Sporting Equipment, Inc., makes two types...Ch. 8 - The Sea Wharf Restaurant would like to determine...Ch. 8 - Blair Rosen. Inc. (BR) is a brokerage firm that...Ch. 8 - Round Tree Manor is a hotel that provides two...Ch. 8 - Industrial Designs has been awarded a contract to...Ch. 8 - Vollmer Manufacturing makes three components for...Ch. 8 - Photon Technologies, Inc., a manufacturer of...Ch. 8 - The Westchester Chamber of Commerce periodically...Ch. 8 - The management of Hartman Company is trying to...Ch. 8 - The employee credit union at State University is...
Ch. 8 - The Atlantic Seafood Company (ASC) is a buyer and...Ch. 8 - The Silver Star Bicycle Company will manufacture...Ch. 8 - The Clark County Sheriff’s Department schedules...Ch. 8 - Bay Oil produces two types of fuel (regular and...Ch. 8 - Consider the following network representation of a...Ch. 8 - Refer to the transportation problem described in...Ch. 8 - Aggie Power Generation supplies electrical power...Ch. 8 - The Calhoun Textile Mill is in the process of...Ch. 8 - Refer to the Calhoun Textile Mill production...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, statistics and related others by exploring similar questions and additional content below.Similar questions
- Given that sales volumes are forecast to stay steady at 2,000,000 units, the best option is _________________. 1. Manual Production Line 2. Semi-automatic Production Line 3. Fully Automatic Production Linearrow_forwardA US firm, having prior knowledge that Russia would invade Ukraine, bought 100,000 barrels of oil from Heritage Limited , a Trinidad firm . If in January 2022, the US firm enters into a forward contract to purchase the oil at US$65 per barrel to settle in November 2022, what is the gain/loss on the contract to the US firm? The spot price of oil in November averages US$100 per barrel. a. US$35,000 loss b. US$40,000 gain c. US$40,000 loss d. US$35,000 gainarrow_forwardNestlé Indonesia is a subsidiary of Nestlé S.A., headquartered in Vevey, Switzerland, and has been operating for more than 150 years in 189 countries with more than 2,000 brands all of which share the same goal of improving the quality of life and contributing to a healthier future.As a world-leading company, Nestlé started operations in Indonesia in 1971. Nestlé Indonesia now employs around 3,700 employees and operates three factories, namely the Kejayan Factory in East Java to process dairy products such as DANCOW and BEAR BRAND, the Panjang Factory in Lampung to process NESCAF instant coffee. , as well as the Karawang Factory in West Java to produce DANCOW, MILO, and CERELAC.The Marketing Department of Nestle wants to know about the factors that can influence the interest in buying one of its products, namely MILO. Milo products come in a variety of different sensations: there are MILO Choco Bar chocolate bars and delicious MILO Nuggets chocolate chips. Nestle collects data from a…arrow_forward
- Nicholas Grammas is an investment analyst examining the performance of two mutual funds with Janus Capital Group: the Janus Balanced Fund and the Janus Overseas Fund. The Janus Balanced Fund (JANBX): This “core” fund consists of stocks and bonds and its goal is diversification. It has historically produced solid long-term returns through different market cycles. The Janus Overseas Fund (JAOSX): This fund invests in overseas companies based on their individual merits instead of their geography or industry sector. The following table reports a portion of the annual returns (in percent) for these two funds from 2000–2016. Year. Balanced. Overseas 2000 -2.16 -18.57 2001 -5.04 -23.11 2002 -6.56 -23.89 2003 13.74 36.79 2004 8.71 18.58 2005 7.75 32.39 2006 10.56 47.21 2007 10.15 27.76 2008 -15.22 -52.75 2009 24.28 78.12 2010 7.83 19.28…arrow_forwardA private investment club has $3,000 earmarked for investment in stocks. To arrive at an acceptable overall level of risk, the stocks that management is considering have been classified into three categories: high risk, medium risk, and low risk. Management estimates that high-risk stocks will have a rate of return of 17%/year; medium-risk stocks, 7%/year; and low-risk stocks,6%/year. The members have decided that the investment in low-risk stocks should be a quarter of the sum of the investments in the stocks of the other two categories. Assuming that all the money available for investment is invested, how much should the club invest in each type of stock if the investment goal is to have a return of $413/year on the total investment? (Round your answer to 1 decimal place.)arrow_forwardFederated Electronics, Ltd., manufactures display screensand monitors for computers and televisions, which it sellsto companies around the world. It wants to construct a new warehouse and distribution center in Asia to serve emerg-ing markets there. It has identified potential sites in the port cities of Shanghai, Singapore, Pusan, Kaohsiung, and HongKong and has estimated the possible revenues for each(minus construction costs which are higher in some citieslike Hong Kong). At each site the projected revenues are primarily based on these factors, (1) the economic condi-tions at the port including the projected traffic, infrastruc-ture, labor rates and availability; and expansion and modernization; and (2) the future government situationwhich includes the political stability, fees, tariffs, duties,and trade regulations. Following is a payoff table thatshows the projected revenues (in $ billions) for six years given the four possible combinations for positive and nega-tive port and…arrow_forward
- General Buck Turgidson is preparing to make his annual budget presentation to the U.S. Senate and is speculating about his chances of getting all or part of his requested budget approved. From his 20 years of experience in making these requests, he has deduced that his chances of getting between 50 and 74 percent of his budget approved are twice as good as those of getting between 75 and 99 percent approved, and two and one-half times as good as those of getting between 25 and 49 percent approved. Further, the general believes that there is no chance of less than 25 percent of his budget being approved. Finally, the entire budget has been approved only once during the general’s tenure, and the general does not expect this pattern to change. What are the probabilities of 0–24 percent, 25–49 percent, 50–74 percent, 75–99 percent, and 100 percent approval, according to the general?arrow_forwardObtain information on the following two funds:(i) Colonial First State Imputation(ii) Vanguard Emerging Markets Shares Index FundCompare the risks to investors presented by each of these fund and identify the types of investors that would favour these funds.arrow_forwardComparing two college enrollments, we have college "A," that had 14,100 students in 2005, and projected enrollment increases of 1500 students per year. College "B" had 2005 enrollment of 41,700, and a projected enrollment decline of 800 students per year. Determine the year at which both schools will have the same enrollment, and what that enrollment would be.arrow_forward
- Hart Venture Capital (HVC) specializes in providing venture capital for software development and Internet applications. Currently HVC has two investment opportunities: (1) Security Systems, a firm that needs additional capital to develop an Internet security software package, and (2) Market Analysis, a market research company that needs additional capital to develop a software package for conducting customer satisfaction surveys. In exchange for Security Systems stock, the firm asked HVC to provide $600,000 in year 1, $600,000 in year 2, and $250,000 in year 3 over the coming three-year period. In exchange for Market Analysis stock, the firm asked HVC to provide $500,000 in year 1, $350,000 in year 2, and $400,000 in year 3 over the same three-year period. HVC believes that both investment opportunities are worth pursuing. However, because of other investments, HVC is willing to commit at most $800,000 for both projects in the first year, at most $700,000 in the second year, and…arrow_forwardBernadette intends to invest up to ₱50,000 in either Best Fund, or a time deposit or both. The Best Fund pays 8% per year and the time deposit pays 9%. Because the Best Fund is riskier than the time deposit, so she intends to put at most ₱30,000 into the time deposit and at least ₱10,000 into the Best Fund. How much should she allot to each investment in order to maximize her returns?arrow_forwardHaving suffered an embarrassing defeat in Hobshire, Achlúk is rearming his army of orcs with axes, maces, and spears. This time, his budget is tight, and he wants to spend as little as possible but still inflict at least 8,800 units of damage on medium targets and 9,600 units of critical damage while keeping the total weight to no more than 4,600 pounds. What should his weapons arsenal look like, and how much will it cost? Weapon Cost (gold pieces) Damage to Medium Targets Critical Damage Weight (pounds) Axe (Throwing) 8 6 12 2 Javelin 1 6 12 2 Longsword 15 8 32 4 Mace (Light) 5 6 12 4 Spear 2 8 24 6 Axes Maces Spears How much will it cost? gold piecesarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
MATLAB: An Introduction with ApplicationsStatisticsISBN:9781119256830Author:Amos GilatPublisher:John Wiley & Sons Inc
Probability and Statistics for Engineering and th...StatisticsISBN:9781305251809Author:Jay L. DevorePublisher:Cengage Learning
Statistics for The Behavioral Sciences (MindTap C...StatisticsISBN:9781305504912Author:Frederick J Gravetter, Larry B. WallnauPublisher:Cengage Learning
Elementary Statistics: Picturing the World (7th E...StatisticsISBN:9780134683416Author:Ron Larson, Betsy FarberPublisher:PEARSON
The Basic Practice of StatisticsStatisticsISBN:9781319042578Author:David S. Moore, William I. Notz, Michael A. FlignerPublisher:W. H. Freeman
Introduction to the Practice of StatisticsStatisticsISBN:9781319013387Author:David S. Moore, George P. McCabe, Bruce A. CraigPublisher:W. H. Freeman
MATLAB: An Introduction with Applications
Statistics
ISBN:9781119256830
Author:Amos Gilat
Publisher:John Wiley & Sons Inc
Probability and Statistics for Engineering and th...
Statistics
ISBN:9781305251809
Author:Jay L. Devore
Publisher:Cengage Learning
Statistics for The Behavioral Sciences (MindTap C...
Statistics
ISBN:9781305504912
Author:Frederick J Gravetter, Larry B. Wallnau
Publisher:Cengage Learning
Elementary Statistics: Picturing the World (7th E...
Statistics
ISBN:9780134683416
Author:Ron Larson, Betsy Farber
Publisher:PEARSON
The Basic Practice of Statistics
Statistics
ISBN:9781319042578
Author:David S. Moore, William I. Notz, Michael A. Fligner
Publisher:W. H. Freeman
Introduction to the Practice of Statistics
Statistics
ISBN:9781319013387
Author:David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:W. H. Freeman
Solve ANY Optimization Problem in 5 Steps w/ Examples. What are they and How do you solve them?; Author: Ace Tutors;https://www.youtube.com/watch?v=BfOSKc_sncg;License: Standard YouTube License, CC-BY
Types of solution in LPP|Basic|Multiple solution|Unbounded|Infeasible|GTU|Special case of LP problem; Author: Mechanical Engineering Management;https://www.youtube.com/watch?v=F-D2WICq8Sk;License: Standard YouTube License, CC-BY
Optimization Problems in Calculus; Author: Professor Dave Explains;https://www.youtube.com/watch?v=q1U6AmIa_uQ;License: Standard YouTube License, CC-BY
Introduction to Optimization; Author: Math with Dr. Claire;https://www.youtube.com/watch?v=YLzgYm2tN8E;License: Standard YouTube License, CC-BY