For Exercises, identify the objective function and constraints of the linear programming problem. Then solve the problem and interpret the real-world meaning of the results.Investment Choices The following table shows the average annual rate of return on a variety of TIAA-CREF investment accounts over a 10-year period.
As of ( | i/30/04 |
CREF Variable Annuity Accounts | 10-Year Average |
Bond Market | 7.15% |
Equity Index | 11.34% |
Global Equities | 7.24% |
Growth | 8.56% |
Money Market / | 4.22% |
Social Choice | 10.31% |
Stock | 9.97% |
Source: www.tiaa-cref.com.
An investor wants to invest at least $2000 in the Stock and Growth accounts. He assumes that he will be able to get a return equal to the 10-year average, and he wants the total return on his investment to be at least 9 percent. He assigns each share in the Stock account a risk rating of 6 and each share in the Growth account a risk rating of 7. The approximate share price at the end of June 2004 was $ 174 per share for the Stock account and $55 per share for the Growth account. He will use these prices in his analysis. How many shares of each account should he buy in order to minimize his overall risk? [Note that fractions of shares may be purchased. Also, to make computations easier, round each percentage to the nearest whole-number percent (i.e., for 9.97 percent, use 10 percent).]
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