A financial advisor is about to build an investment portfolio for a client who has $100,000 to invest. The four investments available are A, B, C, and D. Investment A will earn 4% and has a risk of two points per $1,000 invested. B earns 6% with 3 risk points; C earns 9% with 7 risk points; and D earns 11% with a risk of 8. The client has put the following conditions on the investments: A is to be no more than one-half of the total invested. A cannot be less than 20% of the total investment. D cannot be less than C. Total risk points must be at or below 1,000.Identify the decision variables of this problem. Write out the objective function and constraints. Do not solve.

Question

Nikki Hetzell · Accepted Answer

Final Answer :

Maximize 0.04A + 0.06B + 0.09C + 0.11D
Subject to
A + B + C + D = $100,000
.5A - .5B - .5C -.5D ≤ 0 (rearranged from A ≤ .5(A + B + C + D))
.8A - .2B - .2C - .2D ≥ 0 (rearranged from A ≥ .2 (A + B + C + D))
-C + D ≥ 0 (rearranged from D ≥ C)
.002A + .003B + .007C + .008C ≤ 1000

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