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A brokerage firm has been tasked with investing $500,000 for a new client. The client has asked that the broker select promising stocks and bonds for investment, subject to the following guidelines:

At least 20% in municipal

At least 10% each in real estate stock and pharmaceutical stock

At least 40% in combination of energy and domestic automobile stocks, with each accounting for at least 15%

No more than 50% of the total amount invested in energy and automobile stocks in a combination of real estate and pharmaceutical company stock

Subject to these constraints, the clients goal is to maximize projected return on investments. The broker has prepared a list of high quality stocks and bonds and their corresponding rates of return, as shown in the following table.

Investment: Annual Rate of Return

City of Miami (municipal) bonds: 5.3%

American Smart Car: 8.8%

GreenEarth Energy: 4.9%

Rosslyn Pharmaceuticals: 8.4%

RealCo (real estate): 10.4%

Formulate this portfolio selection problem by using LP and solve it by using excel/spreadsheet

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91904343

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