Exhibit 7.2 The Following Questions Are Based on the Problem Below

question 27

Multiple Choice

Exhibit 7.2
The following questions are based on the problem below.
An investor has $150,000 to invest in investments A and B. Investment A requires a $10,000 minimum investment, pays a return of 12% and has a risk factor of .50. Investment B requires a $15,000 minimum investment, pays a return of 10% and has a risk factor of .20. The investor wants to maximize the return while minimizing the risk of the portfolio. The following multi-objective linear programming (MOLP) has been solved in Excel.
-Refer to Exhibit 7.2. Which cell(s) is(are) the target cells in this model?

• A) $B$6:$C$6, $B$10:$B$11
• B) $B$6:$C$6
• C) $B$6:$D$6
• D) $B$10:$B$11

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Definitions:

Economic Profits

The surplus remaining after deducting all costs, including opportunity costs, from total revenues, indicating a firm's financial performance beyond breaking even.

Decreasing Returns to Scale

A situation in which, as the scale of production increases, the output increases at a diminishing rate, resulting in reduced efficiency.

Price-Inelastic

Describes a situation where the quantity demanded or supplied changes little when the price changes.

Prisoner's Dilemma

A scenario in game theory where two individuals acting in their own self-interest do not produce the optimal outcome.