Reference no: EM131213227
Carefully read the case in the next page and complete the following tasks.
1. Assuming that Frank will invest all $100,000, develop a linear programming model to determine the amount to be placed in each investment so that the total risk will be minimized while meeting the four portfolio goals, by
a) first write out the complete formulation,
b) then use Excel Solver to find the solution.
(Hints: Risk is calculated by amount invested on a product multiplied by its associated risk factor; for example, if $100 is invested in Atlantic Lighting, then its associated risk is 100x25=2500.)
2. Interpret reduced cost for each coefficient in the objective function and interpret shadow price for each constraint;
3. Reformulate the problem so that the objective is to maximize the expected return while keeping total risk less than or equal to 1,500,000 and the three remaining portfolio goals, and use Solver to find the solution.
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