DJS Investment Services must develop an investment portfolio for a new client. A
ID: 366409 • Letter: D
Question
DJS Investment Services must develop an investment portfolio for a new client. As an initial investment strategy, the new client would like to restrict the portfolio to a mix of two stocks:
The client wants to invest $40,000 and established the following two investment goals:
Priority Level 1 Goal
Goal 1: Obtain an annual return of at least 9%.
Priority Level 2 Goal
Goal 2: Limit the investment in Key Oil, the riskier investment, to no more than 60% of the total investment.
Formulate a goal programming model for the DJS Investment problem. If you don't need the variable in the model, enter "0". If you need a negative number, enter minus sign with it.
x2 = number of shares of Key Oil purchased
I already finished part of it, what about other blanks?
Estimated Annual Stock Price/Share Return (%) AGA Products $ 50 6 Key Oil 100 10Explanation / Answer
Goal programming model
Min 2*d1- + 1*d2+
s.t.
50*x1 + 100*x2 <= 40000
50*(6%-9%)*x1 + 100*(10%-9%)*x2 -1*d1+ + 1*d1- = 0
50*(-60%)*x1 + 100*(1-60%)*x2 -1*d2+ + 1*d2- = 0
x1, x2, d1+, d1-, d2+, d2- 0
The last P1 and P2 goal constraints can be rewritten in simple form as below
-1.5*x1 + 1*x2 -1*d1+ + 1*d1- = 0
-30*x1 + 40*x2 -1*d2+ + 1*d2- = 0
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.