Linear Programming Models Are Used by Many Financial Firms to Select

question 109

Essay

Linear programming models are used by many financial firms to select a desirable bond portfolio. The following is a simplified version of such a model. Abby is considering investing in four bonds; $1.5 million is available for investment. The expected annual return, the worst-case annual return on each bond, and the "duration" of each bond are given below (The duration of a bond is a measure of the bond's sensitivity to interest rates.) Abby wants to maximize the expected return from her bond investments, subject to the following three constraints:
∙ The worst-case return of the bond portfolio must be at least 8%.
∙ The average duration of the portfolio must be at most 6. For example, a portfolio that invests $600,000 in bond 1 and $400,000 in bond 4 has an average duration of [600,000(3) + 400,000 (9)]/1,000,000 = 5.4.
∙ Because of diversification requirements, at most 40% of the total amount invested can be invested in a single bond.
Determine how Abby can maximize the expected return on her investment.

Explain the perceptual phenomena related to the organization of stimuli, such as the figure-ground distinction and Gestalt laws of grouping.

Evaluate how perceptual processes are adaptive, allowing for consistent and functional interpretations of our constantly changing sensory inputs.

Understand the concept of perception and its subjective nature influenced by personal experiences and expectations.

Recognize the different claimed types of extrasensory perception (ESP) and their characteristics.

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Definitions:

Interpreters

Professionals who convert information from one language into another, facilitating communication between people who do not speak the same language.

Behavior

The actions or reactions of an individual or group in response to external or internal stimuli.

Replacement Hypothesis

A theory that suggests new members or elements within a system replace older ones, often in the context of social groups or ecological systems.

Therapist

A professional trained in the treatment of mental, emotional, and behavioral disorders, providing support and techniques to help individuals manage and overcome challenges.