Portfolio Manager Max Gaines Needs to Develop an Investment Portfolio

question 13

Essay

Portfolio manager Max Gaines needs to develop an investment portfolio for his clients who are willing to accept a moderate amount of risk.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 an annual return of no less than 3%.Formulate the appropriate 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:

Indirect Method

A method for creating the cash flow statement that involves modifying net income based on balance sheet account variations to compute the operating activities' cash flow.

Accounts Receivable

Money owed to a company by its customers for products or services that have been delivered but not yet paid for.

Accrued Liabilities

Expenses that have been incurred but not yet paid, recognized on the balance sheet for financial reporting purposes.

Quality Of Income Ratio

A ratio that indicates the proportion of income that has been realized in cash and thus gives an idea of the company's cash flow condition.