Keychain Publishing Is Planning to Release Two Books, Simultaneously, by the Same

question 22

Essay

Keychain Publishing is planning to release two books, simultaneously, by the same author. One is a fictional book, while the other is the author's autobiography. The details of its cost, production, and demand are given in the table below. $\begin{array}{|l|l|l|}\hline \text { Keychain Pub lishing } & & \\\hline & & \\\hline \text { Data } & & \\\hline & \text { Fictional } & \text { Autobiography } \\\hline \text { Cost/book } & \$ 1.75 & \$ 1.50 \\\hline \text { Price/book } & \$ 11.49 & \$ 9.86 \\\hline & & \\\hline \text { Base demand } & 50,000 & 65,000 \\\hline \text { Increase/\$1 Adv. } & 25 & 35 \\\hline \text { Min. percent } & & \\\text { requirement } & 35 \% \\\hline \text { Max. percent limitation } & 70 \% \\\hline & \\\hline \text { Total Budget } & \$ 150,000 \\\hline\end{array}$ Keychain Publishing has $150,000 available to bind books and advertise them with an objective of maximizing profit contribution. Provide the objective function for maximizing profits, along with its constraints.

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Definitions:

Mean-Variance Efficient Portfolio

A portfolio that offers the highest expected return for a given level of risk or the lowest risk for a given level of expected return.

Sensitivity Coefficients

Sensitivity coefficients measure the responsiveness of an asset's return to changes in underlying market factors or risks.

Macroeconomic Factor

A variable that impacts the economy at a large scale, influencing economic outcomes like growth rates, unemployment, and inflation.

Single-Index Model

The Single-Index Model is a streamlined method to evaluate the return of a security or portfolio understanding its sensitivity to movements in a common market index.