A Financial Planner Wants to Design a Portfolio of Investments

question 80

Essay

A financial planner wants to design a portfolio of investments for a client. The client has $400,000 to invest and the planner has identified four investment options for the money. The following requirements have been placed on the planner. No more than 30% of the money in any one investment, at least one half should be invested in long-term bonds which mature in six or more years, and no more than 40% of the total money should be invested in B or C since they are riskier investments. The planner has developed the following LP model based on the data in this table and the requirements of the client. The objective is to maximize the total return of the portfolio.
$$\begin{array} { c c c l } \text { Investment } & \text { Return } & \text { Years to Maturity } & \text { Rating } \\\hline \mathbf { A } & 6.45 \% & 6 & \text { 1-Excellent } \\\text { B } & 8.5 \% & 5 & \text { 3-Gaod } \\\text { C } & 9.00 \% & 8 & \text { 4-Fair } \\\text { D } & 7.75 \% & 4 & \text { 2-Very Gaod }\end{array}$$ Formulate the LP for this problem.

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Definitions:

Spain

A country in southwestern Europe known for its diverse heritage, rich history, and cultural contributions, particularly in the arts, cuisine, and architecture.

Financial Authority

An organization that governs and regulates the financial markets, ensuring legality, integrity, and stability.

Bill of Rights

A landmark document or series of amendments in various nations that outlines the fundamental rights and protections of its citizens.

Spanish Princess

A term that can refer to any princess from the Spanish royal family, historically significant in the politics and dynastic marriages of Europe.