Use the Table Below to Answer the Following Questions) Develop a Nonlinear Optimization Models Model to Find the Optimal

question 38

Multiple Choice

Use the table below to answer the following questions) .
Jonathan Reese is considering three stocks in which to invest with a fixed budget. The table below provides information on Jonathan's expected returns for each stock. The table also provides information, collected from market researchers, on the variance-covariance matrix of the individual stocks. He expects a total return of at least 10%. $$\begin{array} { | l | r | l | l | l | l | r | } \hline \begin{array} { l } \text { Reese's Stuck } \\\text { Investment } \\\text { Plan }\end{array} & & & & & & \\\hline & & & & & & \\\hline \text { Data } & & & & \\\hline & \text { Expected } & & & { \text { Variance-Covariance Matrix } } \\\hline & \text { Return } & & & \text { Stack 1 } & \text { Stack 2 } & \text { Stack 3 } \\\hline \text { Stack 1 } & 10 \% & & \text { Stack 1 } & 0.021 & 0.018 & - 0.003 \\\hline \text { Stack 2 } & 11 \% & & \text { Stack 2 } & 0.018 & 0.070 & 0.006 \\\hline \text { Stack 3 } & 9 \% & & \text { Stack 3 } & - 0.003 & 0.006 & 0.003 \\\hline \begin{array} { l } \text { Target } \\\text { Retum }\end{array} & 10 \% & & & & & \\\hline\end{array}$$ Develop a Nonlinear Optimization Models model to find the optimal allocation of the budget to each stock, and variance calculations for squared terms and cross-products based on the variance-covariance matrix.
-According to the model, what percentage of the budget should be allocated to Stock 1?

• A) 10%
• B) 25%
• C) 50%
• D) 40%

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Definitions:

Short-Run Monopoly

A monopoly market condition characterized by a single seller in the short term where certain inputs remain fixed.

Profit-Maximizing Price

The price level at which a business can sell its product or service to achieve the highest possible profit.

ATC Curve

represents the Average Total Cost of production, showing how costs change with changes in output level.

Profit-Maximizing Monopoly

A monopolistic entity that adjusts its production volume and price to achieve the highest possible profits.