Client has 800,000 that must be invested in 3 funds. 20 to 40% invested in growth fund, 20 to 50% in income fund and at least 30% in money market fund. Client has a max risk index of 0.05. Risk indicators - growth fund is 0.10, income fund is 0.07 and money market is 0.01. Portfolio risk index is computed as a weighted average of risk rating for the three funds where the weights are the fraction of the clients portfolio invested in each of the funds.
Yields are growth - 18%, income fund - 12.5% and money market - 7.5%.
I need to find the following:
How much of the $800,000 should be invested in each of the funds? What is the annual % yield for the investment recommendation?
Assume that the client's risk index increased to 0.055. How much would the yield increase and how would the investment recommendation change for each of the funds and the annual % yield?
How would the recommendation change if the amount invested in the growth fund is not allowed to exceed the amount invested in the income fund?