Simple method to maximize objective function


An investor is considering three sorts of investments: a high-risk venture in oil leases with the potential return of 15%, medium-risk investment in stocks with the 9% return, and the relatively safe bond investment with 5% return.  He has $50,000 to invest.  Because of risk, he will limit his investment in oil leases and stocks to 30% and his investment in oil leases and bonds to 50%. How much must he invest in each to maximize his return, supposing investment returns are as expected?

  1. Maximum = $1650 with Stock = $10,000, Bonds = $15,000
  2. Maximum = $3650 with Oil = $15,000, Stock = $10,000, Bonds = $25,000
  3. Maximum = $2750 with Oil = $15,000, Bonds = $10,000
  4. Maximum = $2750 with Oil = $15,000, Stock = $10,000, Bonds = $25,000

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Basic Statistics: Simple method to maximize objective function
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