An investor wishes to invest some or all of his $12.5 million in a diversified portfolio through a commercial lender. The types of investments, the expected interest per year, and the maximum allowed percentage he will consider include the following (the variable name is given in parentheses in the investment column):
INVESTMENT EXPECTED INTEREST MAXIMUM ALLOWED
Low-income mortgage loans (L) 7.00% 20%
Conventional mortgage loans (C) 6.25% 40%
Government sponsored mortgage loans (G) 8.25% 25%
Bond investments (B) 5.25% 12%
Stock investments (S) 8.75% 15%
Futures trading (F) 9.50% 10%
The investor also wants at least 35% of his investments to be in non-mortgage instruments and no more than
60% to be invested in high-yield instruments (i.e., expected interest > 8%) that carry high risk. State the
primal LP-the objective is to maximize total return subject to constraints.