Answer:
Answer is explained below in the explanation section.
Explanation:
Solution:
An investor has up to $250,000 to invest in three types of investment.
Type A pays 8% annually and has risk factor of 0.
Type B pays 10% annually and has risk factor of 0.06.
Type C pays 14% annually and has risk factor of 0.10.
So,
Decision Variables are:
= Total Amount invested in Type A.
= Total Amount invested in Type B.
= Total Amount invested in Type C.
So, the Objective Function will be:
Objective function:
Max Z = 0.08 + 0.10 + 0.14
And the Constraints will be:
1. Total Amount Variable:
+ + 250000
2. Total Risk is no greater than 0.05:
0 + 0.06 + 0.10 0.05
3. At least one fourth of the total amount invested to be allocated to Type A investment.
0.25 ( + + )
0.75 - 0.25 - 0.25 0
4. At least one fourth of the total amount to be allocated to Type B investment.
0.25 ( + + )
-0.25 + 0.75 - 0.25 0
5. And the non- negativity constraints are:
,, and 0