A brokerage firm has been tasked with investing $500,000 for a new client. The client has asked that the broker select promising stocks and bonds for investment, subject to the following guidelines:
At least 20% in municipal
At least 10% each in real estate stock and pharmaceutical stock
At least 40% in combination of energy and domestic automobile stocks, with each accounting for at least 15%
No more than 50% of the total amount invested in energy and automobile stocks in a combination of real estate and pharmaceutical company stock
Subject to these constraints, the client’s goal is to maximize projected return on investments. The broker has prepared a list of high quality stocks and bonds and their corresponding rates of return, as shown in the following table.
Investment: Annual Rate of Return
City of Miami (municipal) bonds: 5.3%
American Smart Car: 8.8%
Green Earth Energy: 4.9%
Rosslyn Pharmaceuticals: 8.4%
Real Co (real estate): 10.4%
Formulate this portfolio selection problem by using LP and solve it by using excel/spreadsheet