Use This Information to Answer the Following Questions -Use the Sensitivity Report to Answer the Following Questions:
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question 14

Essay

Use this information to answer the following questions.
An investment company currently has $1 million available for investment in five different stocks.The company wants to maximize the interest earned over the next year.The five investment possibilities along with the expected interest earned are shown below.To manage risk,the investment firm wishes to have at least 35% of the investment in stocks A and B.Furthermore,no more than 15% of the investment may be in stock E.
$$\begin{array} { l c } \text { Investment } & \text { Expected Interest Earned (\%) } \\\text { Stock A } & 7 \\\text { Stock B } & 9 \\\text { Stock C } & 8 \\\text { Stock D } & 10 \\\text { Stock E } & 11\end{array}$$

-Use the Sensitivity Report to answer the following questions:
a.What is the optimal total expected interest earned for next year?
b.What is the dollar amount that should be invested in each stock?
c.Which constraints are binding? Which constraints are not binding?
d.Is the solution to the problem unique or are there alternate optimal solutions?
e.Does the optimal solution call for investing the entire $1,000,000?

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Definitions:

Reciprocal Inhibition

Reciprocal inhibition is a principle in psychology that suggests the presence of a certain response will inhibit the occurrence of an opposite response, used therapeutically to reduce anxiety through relaxation techniques.

Symptom Substitution

A theory suggesting that if a symptom is removed without resolving the underlying cause, a new symptom will emerge to take its place.

Problem Reduction

Problem reduction is a strategy in problem-solving processes that involves breaking down a larger, often complex problem into smaller, more manageable parts to address them individually.

Joseph Wolpe

A psychiatrist who significantly contributed to the development of behavioral therapy through techniques like systematic desensitization.