An Investor Seeks to Create a Portfolio from Three Types

question 34

Essay

An investor seeks to create a portfolio from three types of securities: Treasury Bills (T), Corporate Paper (C), and Junk Bonds (J). The table lists the expected rates of return for the asset types and their average risk (on a 1-5 scale, where '5' denotes maximum risk). The investor seeks portfolio allocations (T + C + J = 1) that will maximize the expected return on her portfolio, while maintaining an overall risk of no more than '3'.
$\begin{array} { l c c } \text { Security } & \text { Return (\%) } & \text { Risk } \\\hline \text { Treasury Bills } & 2.5 & 2.0 \\\text { Corporate Papers } & 5.0 & 2.5 \\\text { Junk Bonds } & 8.0 & 5.0 \\\hline\end{array}$
(a) Formulate the investor's linear programming problem.
(b) Why will the investor’s portfolio contains only two assets? Determine the investor’s optimal portfolio. If the investor is willing to increase her portfolio risk by 1.0, how much does her return increase?

Understand how to end indirect claim messages positively and constructively.

Comprehend the appropriate manner to deny credits and adjust refusal messages.

Grasp the correct structure and components of an indirect claim message.

Recognize the significance of presenting facts clearly and objectively in claim messages.

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Definitions:

Congress

A legislative body of a country, typically bicameral, responsible for making laws and representing the electorate.

Judicial Branch

The branch of government responsible for interpreting the laws, ensuring justice, and administering the legal system within a country or state.

Specific Duties

Obligations or tasks that are clearly defined or particularized for an individual or role in a work or legal context.

Formal Rule Making

A type of rule making that is used when legislation requires a formal hearing process with a complete transcript; consists of publication of the proposed rule in the Federal Register, a public hearing, publication of formal findings, and publication of the final rule if adopted.