Investments is in the process of recommending to a client ho

Investments is in the process of recommending to a client how to decide a potential $10000 investment between two stocks. The client has selected a computer manufacturer and an automotive company for his investments. The computer stock is selling for $9.81 per share and the auto stack for $13.27 per share. Their estimated returns are $4.00 and $5.00 respectively. To diversify, at least $3000 should be invested in each, and the number of shares of the computer stock should not exceed the number of shares of the auto stock by more than 500. The client wishes to maximize return.  Formulate this solution as a linear programming problem. define the decision variables

Solution

Computer share=$9.81Selling price

Auto stack share = $13.27 per share.

Returns=4x1 +5x2

4x1 +5x2>3,000

X1 +X2<500

1 multiply =>4X1 +5X2=3,000 => 1

4 multiply=> 4X1 +4X2=2000 =>2

sign chage   -      -         -

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                             X2=1,000

Therefore 4X1 =2,000

X1 = 2,000/ 4

X1=500

So optimum solution computer share maximum 500 shares and Auto stack share =1,000 shares have to be invested to get maximum the profit.

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