Problem

For Exercises, identify the objective function and constraints of the linear programming p...

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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Solutions For Problems in Chapter 4.2