Ask Question, Ask an Expert


Ask Basic Finance Expert

Ferris, an investment management firm located in New York, has recently been retained as the endowment fund manager for a small Midwestern college. The firm is attempting to determine a best investment portfolio for its client and has reduced overall consideration to six alternative investments to add to the college portfolio. Information for the investment choices includes point estimates for: price per share; annual growth in price per share; annual dividend per share; and a measure of the risk associated with each investment. In this case, risk is defined as the standard deviation in return. Dollar return per share of stock is defined as price per share one year hence less current price per share plus dividend per share.

Alternatives 1 2 3 4 5 6
Current price per share $80.00 $100.00 $160.00 $120.00 $150.00 $200.00

Projcted annl grwth rte 0.08 0.07 0.10 0.12 0.09 0.15

Projected annual-
dividend per share $4.00 $6.50 $1.00 $0.50 $2.75 $0.00

Projected risk 0.05 0.03 0.10 0.20 0.06 0.08

The endowment fund has $2.5 million to invest and the college trustees, having reviewed the alternatives, wish to have the portfolio structured to adhere to certain conditions with the following ordered priorities:

· The portfolio should return at least 7.0% on the additional investment.

· The maximum dollar amount to be invested in alternative 6 should not exceed $250,000.

· Not more than $500,000 should be invested in alternatives 1 and 2 combined.

· Total weighted risk should not be greater than 10%*

· The portfolio should return at least $10,000 in dividends annually.

· The amount invested in alternatives 1 and 2 combined should be at least 10% of the total funds invested in this process.

· Total weighted risk should not be greater than 1%*

* Total weighted risk is defined as:

($ invested in alternative i)(risk of alternative i))/(total $ invested in all alternatives)

problem how do I Formulate a linear goal programming model that can be used to determine the selection of investment alternatives to include in the portfolio that will best satisfy the stated goal priorities established by the college trustees.


Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M927981

Have any Question? 

Related Questions in Basic Finance

If a taxpayers marginal tax rate is 33 percent what is the

If a taxpayer's marginal tax rate is 33 percent, what is the after- tax yield on a corporate bond that pays 5 percent interest? If the average marginal tax rate of all taxpayers is 50 percent, will the taxpayer with the ...

Twice a year for 15 years warren ford invested 1700

Twice a year for 15 years, Warren Ford invested $1,700 compounded semiannually at 6% interest. What is the value of this annuity due?

Secondary market for t-bills describe the activity in the

Secondary Market for T-Bills: Describe the activity in the secondary T-bill market. How can this degree of activity benefit investors in T-bills? Why might a financial institution sometimes consider T-bills as a potentia ...

You are an adviser to the indian government until now

You are an adviser to the Indian government. Until now, government policy in India has been to severely limit imports into India, resulting also in a low level of Indian exports. The government is considering a policy sh ...

In groups of 3-4 students should choose firstly an industry

In groups of 3-4, students should choose firstly an industry and secondly two (2) ASX listed companies in this same industry upon which to undertake a fundamental analysis. Fundamental Analysis seeks to identify factors ...

Les moore retired as president of goodman snack foods

Les Moore retired as president of Goodman Snack Foods Company but is currently on a consulting contract for $35,000 per year for the next 10 years. a. If Mr. Moore's opportunity cost (potential return) is 10 percent, wha ...

Geotechnical instrumentation is frequently employed for

Geotechnical Instrumentation is frequently employed for monitoring the condition of reclamation. Sometimes two piezometers are installed inside the same borehole. What is the reason behind this?

1 suppose you have a 1000 face value bond with 12 years to

1. Suppose you have a $1,000 face value bond with 12 years to maturity, a coupon rate of 6% and a yield to maturity of 8%. If the bond makes semiannual payments, what is its price today? 2. Compute the value of Acme Comm ...

According to irving fisher when velocity and output are

According to Irving Fisher, when velocity and output are fixed, the quantity theory of money implies that inflation equals money growth. What does the quantity theory imply for inflation in the long run in an economy wit ...

Essaycourse textbook graham r j smart s b amp megginson w l

Essay Course Textbook Graham R. J., Smart, S. B., & Megginson, W. L. (2010). Corporate finance: Linking theory to what companies do (3rd ed.). Mason, OH: South-Western Identify the theories discussed in the unit's readin ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate