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

question 56

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 is the cross-product value for Stock 3 variance?

• A) 0.00049
• B) 0.00283
• C) -0.00047
• D) 0.00074

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Definitions:

Performance Standards

Specific criteria used to measure the efficiency, effectiveness, and quality of an employee's work or an organization’s outputs.

Achievable

Pertains to goals or objectives that can realistically be accomplished within the available resources and constraints.

Complex

Comprising many interconnected parts or elements; not simple or straightforward, often requiring significant time or effort to understand or deal with.

Direct Observation

A research method where data is collected by watching subjects in their natural or controlled environment without interference or manipulation.