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mjhgfd mjhgfd
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6 years ago

115. Linear programming models are used by many financial firms to select a desirable bond portfolio. The following is a simplified version of such a model. Abby is considering investing in four bonds; 1.5 million is available for investment. The expected annual return, the worst-case annual return on each bond, and the duration of each bond are given below (The duration of a bond is a measure of the bonds sensitivity to interest rates.)
   


 
 

Abby wants to maximize the expected return from her bond investments, subject to the following three constraints:
 
    The worst-case return of the bond portfolio must be at least 8.
    The average duration of the portfolio must be at most 6. For example, a portfolio that invests 600,000 in bond 1 and 400,000 in bond 4 has an average duration of 600,000(3) + 400,000 (9)/1,000,000 = 5.4.
    Because of diversification requirements, at most 40 of the total amount invested can be invested in a single bond.


 


   Determine how Abby can maximize the expected return on her investment.
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drawnbluddrawnblud
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6 years ago
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sakoon
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6 years ago
Smart ... Thanks!
emilyas19
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Yesterday
Just got PERFECT on my quiz
zsc999
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2 hours ago
this is exactly what I needed
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