Portfolio Manager Max Gaines Needs to Develop an Investment Portfolio

question 20

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. $$\begin{array} { c | r r r r } & { \text { Annual Returns (Planning Scenarios) } } \\\text { Mutual Fund } & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\hline \text { International Stock } & 22.37 & 26.73 & 6.46 & - 3.19 \\\text { Large-Cap Blend } & 14.88 & 18.61 & 10.52 & 5.25 \\\text { Mid-Cap Blend } & 19.45 & 18.04 & 5.91 & - 1.94 \\\text { Small-Cap Blend } & 13.79 & 11.33 & - 2.07 & 6.85 \\\text { Intermediate Bond } & 7.29 & 8.05 & 9.18 & 3.92\end{array}$$

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Definitions:

AGIL Typology

A theoretical framework proposed by Talcott Parsons that classifies systems’ functions into four categories: Adaptation, Goal attainment, Integration, and Latency.

Talcott Parson

An American sociologist known for his development of a general theoretical system for the analysis of society called structural functionalism.

Conflict Theory

A sociological perspective that views social and economic inequalities as the result of competing interests between different social groups, leading to conflict.

Social Equilibrium

A state of balance within a society, where social forces and elements are aligned in a way that maintains social order and minimizes conflict.