Portfolio Manager Max Gaines Needs to Develop an Investment Portfolio $\text { Annual Returns (Flanning Scenarios) }$

question 15

Essay

Portfolio manager Max Gaines needs to develop an investment portfolio for his conservative clients. His task is to determine the proportion of the portfolio to invest in each of the five mutual funds listed below so that the portfolio provides the best return possible with a minimum risk. Formulate the maximin linear program. $\text { Annual Returns (Flanning Scenarios) }$
$\begin{array}{c|rrrr}\text { Mutual Fund } & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 }\\\hline \text { International Stock } & 22.37 & 26.73 & 6.46 & -3.19 \\\text { Large-Cap Blend } & 14.88 & 18.61 & 10.52 & 5.25 \\\text { Mid-Cap Blend } & 19.45 & 18.04 & 5.91 & -1.94 \\\text { Small-Cap Blend } & 13.79 & 11.33 & -2.07 & 6.85 \\\text { Intermediate Bond } & 7.29 & 8.05 & 9.18 & 3.92\end{array}$

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Definitions:

Consumer Lease

is a contract where an individual leases goods for personal, family, or household purposes for a set period of time.

Personal Use

The use of a product, service, or property for an individual's private and non-commercial purposes.

Lessor

The party in a lease agreement who owns the property being leased out to another party, known as the lessee.

Finance Lease

A type of lease arrangement where the lessee assumes both the financial risks and rewards of asset ownership, typically involving long-term and non-cancellable terms.