Linear Programming: Formulations
Portfolio Selection You have $10,000 which you wish to invest. You have identified the following investment opportunities: Investment Choices Annual Return Beta Risk Treasury Bonds 5% 0.1 Municipal Bonds 7% 0.3 Proctor & Gamble Stock 11% 1.4 General Motors Stock 12% 1.8 Intel Stock 14% 2.5 You wish to invest at least $2,000 in bonds, in order to diversify your portfolio. You have decided that your portfolio risk should not exceed 1.5. (Portfolio risk is the weighted average of the risks of the individual investments). You wish to determine how much to invest in each choice, so as to maximize the total annual return from the investments.
Set up the problem just to show the variables and contraints etc.