Reference no: EM132800834

Question - 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.

Required -

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).

b) Solve this problem using Excel. How much money should be put in each of the investment options? What is the total return? Which of the goals are not met?