A Financial Advisor Is About to Build an Investment Portfolio

question 93

Essay

A financial advisor is about to build an investment portfolio for a client who has $100,000 to invest. The four investments available are A, B, C, and D. Investment A will earn 4% and has a risk of two "points" per $1,000 invested. B earns 6% with 3 risk points; C earns 9% with 7 risk points; and D earns 11% with a risk of 8. The client has put the following conditions on the investments: A is to be no more than one-half of the total invested. A cannot be less than 20% of the total investment. D cannot be less than C. Total risk points must be at or below 1,000.Identify the decision variables of this problem. Write out the objective function and constraints. Do not solve.

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Definitions:

Exponentially

Involves growth at an increasingly rapid rate over a period of time.

Master Data Management

A process that provides companies with the ability to store, maintain, exchange, and synchronize a consistent, accurate, and timely “single version of the truth” for the company’s core master data.

Data Governance

An approach to managing information across an entire organization.

Data Rot

The gradual degradation or loss of data quality or integrity over time due to various factors such as obsolescence or storage medium deterioration.