Ivana Myrocle wishes to invest her inheritance of 200000 so

Ivana Myrocle wishes to invest her inheritance of $200,000 so that her return on investment is maximized, but she also wishes to keep her risk level relatively low. She has decided to invest her money in any of three possible ways: CDs, which pay a guaranteed 6 percent; stocks, which have an expected return of 13 percent; and a money market mutual fund, which is expected to return 8 percent. She has decided that any or all of the $200,000 may be invested, but any part (or all) of it may be put in any of the 3 alternatives. Thus, she may have some money invested in all three alternatives.Thus she may have some money invested in all three alternatives. In formulating this as a linear programming problem, define the variables as follows:

C= dollars invested in CDs

S= dollars invested in stocks

M= dollars invested in the money market mutual fund

the following factors have been assigned to each investment instrument.

CDS;1.2 Stocks;4.8 Money market mutual fund;3.2... the overall risk of the portfolio is a weighted average of these risks with the weight being the relative amounts put in each investment alternative.

the objective function is:

A. maximize C+S+M

B maximize .06c+.13s+.08m

C. minimize .06c+.13s+.08m

D. minimze C+S+M

E. none

2. write a constraint that would indicate that the amount of money invested in stocks is not more than the amount of money invested in the money market fund

A. s<m

B. .13s>.08m

C. .13s<.08m

D. s>m

3.Which would be the most appropriate constraint for the total amount invested?

A. C+S+M= 200000

B. .06c+.13s+.08m<200000

C. C+S+M<200000

D. C+S+M>200000

E. NONE

4. If C=40,000 S=60,000 and M= 100,000, the average risk would be

A. NONE

B. 3.28

C. 66666.67

D. 3.33

E. 3.07

Solution

answer: 1) max Z = 0.06c+0.13s+0.08m

              2) 0.13s < 0.08m or s<m

              3) c+s+m = 200000

               4) 66666.67