Question

in i Maximum investment in the internet fund

Answer 1

a)

I and B both are in thousands
Objective function = Maximize return = Max 0.12I + 0.09B

Subject to,

1*I + 1*B <= 50 (Available investment funds)

1*I + 0*B <= 35 (Maximum investment in the internet fund)

6I + 4B <= 240 (Maximum risk for a moderate investor is 240)

I,B >= 0 (Non-negativity constraint)

b)

Solving in excel solver,

Internet Fund = $20,000

Blue chip fund = $30,000

Annual return of the portfolio = $5.1*1000 = $5100

Solver screenshot

Decision variables 20 30 Objective Function 5.1 4 Constraints 5 Available investment 6 Maximum investment in Internet fund 7 Maximum risk for moderator investor 50 20 240 50 35 240

Sensitivity Report

A B 1 Microsoft Excel 16.0 Sensitivity Report 2 Worksheet: [Book3]Sheet2 3 Report Created: 4/14/2019 12:53:17 AM 6 Variable Cells Final Reduced Objective Allowable Allowable Value Cost Coefficient Increase Decrease 0.03 0.01 Cell Name 20 30 0.12 0.09 0.015 0.03 10 $C$3 B 12 Constraints 13 14 Cell 15 $D$5 Available investment 16 $DŞ6 Maximum investment in Internet fund 20 17 $D$7 Maximum risk for moderator investor 240 0.015 18 Final Shadow Constraint Allowable Allowable Value Price R.H. Side Increase Decrease 7.5 15 40 Name 50 50 35 240 10 1E+30 30 0.03

c)

Solving in excel solver,

Internet Fund = $35,000

Blue chip fund = $15,000

Annual return of the portfolio = $5.55*1000 = $5550

Decision variables 35 15 Objective Function 5.55 4 Constraints 5 Available investment 6 Maximum investment in Internet fund 7 Maximum risk for moderator investor 50 35 270 50 35 320

d)

Solving in excel solver,

Internet Fund = 0

Blue chip fund = $40,000

Annual return of the portfolio = $3.6*1000 = $3600

Decision variables 40 Objective Function 3.6 4 Constraints 5 Available investment 401 Maximum investment in Internet fund 7Maximum risk for moderator investor 50 35 160 4 160