Describes an investment problem

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Reference no: EM1381360

Ivana Myrocle wishes to invest her inheritance of $200,000 so that her return on investment is maximized, but she also wishes to keep her risk level relatively low. She has decided to invest her money in any of three possible ways: CDs, which pay a guaranteed 6 percent; stocks, which have an expected return of 13 percent; and a money market mutual fund, which is expected to return 8 percent. She has decided that any or all of the $200,000 may be invested, but any part (or all) of it may be put in any of the 3 alternatives. Thus, she may have some money invested in all three alternatives. In formulating this as a linear programming problem, define the variables as follows:

C= dollars invested in CDs
S= dollars invested in stocks
M= dollars invested in the money market mutual fund

According to Table 8-5, which describes an investment problem, suppose that Ivana has decided that the amount invested in stocks cannot exceed one-fourth of the total amount invested. Which is the best way to write this constraint?

S <= 100,000/4

0.13S <= 0.24C + 0.32M

-C + 4S - M <= 0

S <= (C + M) / 4

-C + 3S - M<= 0

Reference no: EM1381360

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