Blair & Rosen, Inc. (B&R), is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who contacted B&R this past week has a maximum of $60,000 to invest. B&R's investment advisor decides to recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 7%, whereas the Blue Chip fund has a projected annual return of 6%. The investment advisor requires that at most $40,000 of the client's funds should be invested in the Internet fund, B&R services include a risk rating for each investment alternative. The Internet fund, which is the more risky of the two investment alternatives, has a risk rating of 6 per thousand dollars invested. The Blue Chip fund has a risk rating of 4 per thousand dollars invested. For example, if $10,000 is invested in each of the two investment funds, B&R's risk rating for the portfolio would be 6(10) + 4(10) 100. Finally, B&R developed a questionnaire to measure each client's risk tolerance. Based on the responses, each client is classified as a conservative, moderate, or aggressive investor. Suppose that the questionnaire results classified the current client as a moderate investor. B&R recommends that a client who is a moderate investor limit his or her portfolio to a maximum risk rating of 290. (a) Formulate a linear programming model to find the best investment strategy for this client. (Assume N is the amount invested in the internet fund project and 8 is the amount invested in the Blue Chip fund. Express the amounts invested in thousands of dollars.) Max s.t. Available investment funds Maximum investment in the internet fund Maximum risk for a moderate investor N, B20 (b) Build a spreadsheet model and solve the problem using Excel Solver. What is the recommended investment portfolio (in dollars) for this client? internet fund $ blue chip fund $ What is the annual return (in dollars) for the portfolio? $ (b) Suppose that a second client with $60,000 to invest has been classified as an aggressive investor. B&R recommends that the maximum portfolio risk rating for an aggressive investor is 320. What is the recommended investment portfolio (in dollars) for this aggressive investor? internet fund blue chip fund $ $ (d) Suppose that a third client with $60,000 to invest has been classified as a conservative Investor. B&R recommends that the maximum portfolio risk rating for a conservative investor is 200. Develop the recommended investment portfolio (in dollars) for the conservative investor. internet fund $ blue chip fund $

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Blair & Rosen, Inc. (B&R), is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A
client who contacted B&R this past week has a maximum of $60,000 to invest. B&R's investment advisor decides to recommend a portfolio consisting
of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 7%, whereas the Blue Chip fund
has a projected annual return of 6%. The investment advisor requires that at most $40,000 of the client's funds should be invested in the Internet
fund, B&R services include a risk rating for each investment alternative. The Internet fund, which is the more risky of the two investment alternatives,
has a risk rating of 6 per thousand dollars invested. The Blue Chip fund has a risk rating of 4 per thousand dollars invested. For example, if $10,000 is
Invested in each of the two investment funds, B&R's risk rating for the portfolio would be 6(10) + 4(10) = 100. Finally, B&R developed a questionnaire
to measure each client's risk tolerance. Based on the responses, each client is classified as a conservative, moderate, or aggressive investor. Suppose
that the questionnaire results classified the current client as a moderate investor. B&R recommends that a client who is a moderate investor limit his
or her portfolio to a maximum risk rating of 290,
(a) Formulate a linear programming model to find the best investment strategy for this client. (Assume N is the amount invested in the internet
fund project and 8 is the amount invested in the Blue Chip fund. Express the amounts invested in thousands of dollars.)
Max
s.t.
Available investment funds
Maximum investment in the internet fund
Maximum risk for a moderate investor
N, B 20
(b) Build a spreadsheet model and solve the problem using Excel Solver. What is the recommended investment portfolio (in dollars) for this client?
internet fund
$
blue chip fund $
What is the annual return (in dollars) for the portfolio?
$
(b) Suppose that a second client with $60,000 to invest has been classified as an aggressive investor. B&R recommends that the maximum portfolio
risk rating for an aggressive investor is 320. What is the recommended investment portfolio (in dollars) for this aggressive investor?
internet fund
blue chip fund
$
$
(d) Suppose that a third client with $60,000 to invest has been classified as a conservative Investor. B&R recommends that the maximum portfolio
risk rating for a conservative investor is 200. Develop the recommended investment portfolio (in dollars) for the conservative investor.
internet fund
blue chip fund
$
$
Transcribed Image Text:Blair & Rosen, Inc. (B&R), is a brokerage firm that specializes in investment portfolios designed to meet the specific risk tolerances of its clients. A client who contacted B&R this past week has a maximum of $60,000 to invest. B&R's investment advisor decides to recommend a portfolio consisting of two investment funds: an Internet fund and a Blue Chip fund. The Internet fund has a projected annual return of 7%, whereas the Blue Chip fund has a projected annual return of 6%. The investment advisor requires that at most $40,000 of the client's funds should be invested in the Internet fund, B&R services include a risk rating for each investment alternative. The Internet fund, which is the more risky of the two investment alternatives, has a risk rating of 6 per thousand dollars invested. The Blue Chip fund has a risk rating of 4 per thousand dollars invested. For example, if $10,000 is Invested in each of the two investment funds, B&R's risk rating for the portfolio would be 6(10) + 4(10) = 100. Finally, B&R developed a questionnaire to measure each client's risk tolerance. Based on the responses, each client is classified as a conservative, moderate, or aggressive investor. Suppose that the questionnaire results classified the current client as a moderate investor. B&R recommends that a client who is a moderate investor limit his or her portfolio to a maximum risk rating of 290, (a) Formulate a linear programming model to find the best investment strategy for this client. (Assume N is the amount invested in the internet fund project and 8 is the amount invested in the Blue Chip fund. Express the amounts invested in thousands of dollars.) Max s.t. Available investment funds Maximum investment in the internet fund Maximum risk for a moderate investor N, B 20 (b) Build a spreadsheet model and solve the problem using Excel Solver. What is the recommended investment portfolio (in dollars) for this client? internet fund $ blue chip fund $ What is the annual return (in dollars) for the portfolio? $ (b) Suppose that a second client with $60,000 to invest has been classified as an aggressive investor. B&R recommends that the maximum portfolio risk rating for an aggressive investor is 320. What is the recommended investment portfolio (in dollars) for this aggressive investor? internet fund blue chip fund $ $ (d) Suppose that a third client with $60,000 to invest has been classified as a conservative Investor. B&R recommends that the maximum portfolio risk rating for a conservative investor is 200. Develop the recommended investment portfolio (in dollars) for the conservative investor. internet fund blue chip fund $ $
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