Reference no: EM132791375

A financial planner was asked by a client to invest $300,000. This money must be placed in stocks, bonds or a mutual fund in real estate. The expected return on investment is 15% for stocks, 8% for bonds and 10% for real estate. While the client would like a higher return, she would be satisfied with at least 10% expected return (goal 1). Due to risk considerations, one needs to put at least 30% of the money in bonds (goal 2) and the amount of money in real estate should not exceed 40% of the money invested in stocks and bonds combined (goal 3). In addition to these goals, there is an absolute restriction stating that under no circumstances more than $150,000 can be invested in any one of the three alternatives.

Problem a) Formulate this problem as a goal programming problem assuming that goal 1 has higher priority (P1) than the others, and goal 2 and 3 have equal priority (P2).

Problem b) How much money should be put in each of the investment options? What is the total return? Which of the goals are not met?