Establishing an investment portfolio

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Janet Lopez is establishing an investment portfolio that will include stock and bond funds. She has $800,000 to invest, and she does not want the portfolio to include more than 60% stocks. The average annual return for the stock fund she plans to invest in is 17%, whereas the average annual return for the bond fund is 6%. She further estimates that the most she could lose in the next year in the stock fund is 20%, whereas the most she could lose in the bond fund is 5%. To reduce her risk, she wants to limit her potential maximum losses to $120,000. Formulate a linear programming model for this problem by defining the decision variables, objective function, and all the constraints. Do NOT solve the problem after formulating.

Reference no: EM131039723

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