(a) Suppose the risk index for the stock fund (the value of C) increases from its current value of 8 to 14. How does the optimal solution change, if at all? O The optimal solution becomes (9600, 3000). O The optimal solution does not change. (b) Suppose the risk index for the money market fund (the value of Cu) increases from its current value of 3 to 4.5. How does the optimal solution change, if at all? O The optimal solution becomes (9600, 3000). O The optimal solution does not change. (c) Suppose C, increases to 14 and Cy increases to 4.5. How does the optimal solution change, if at all? O The optimal solution becomes (9600, 3000). O The optimal solution does not change. Innis Investments manages funds for a number of companies and wealthy dients. The investment strategy is tailored to each dient's needs. for a new client, Innis has been authorized to invest up to $1.2 million in two investment funds: a stock fund and a money market fund. Each unit of the stock fund costs $50 and provides an annual rate of return of 10%; each unit of the money market fund costs $100 and provides an annual rate of return of 4%. The client wants to minimize risk subject to the requirement that the annual income from the investment be at least $60,000. According to Innis risk measurement system, each unit invested in the stock fund has a risk index of 8, and each unit invested in the money market fund has a risk index of 3. The higher risk index associated wth the stock fund simply indicates that it is the riskier investment. Innis's dient also specified that at least $300,000 bn invested in the money market fund. Refer to the computer solution shown below. optimal objetive Valun- 62000.00000 Variable Value 4000,000o0 10000. 00000 Reduced Cost 0.00000 0.00000 Constraint Slach/surplue 0.00000 Dual Value 0,00000 2.14447 7000.00000 0.00000 objective Coefrieient Allowable Variable Incresse Decrease E.00000 Intinite 4.25000 3.0000 3.40000 tstinite Allovable Allowable Canatraint Value Increase Decreane 1200000.0000 300000,00000 42000.00000 420000.00000 12000.00000 3000.00000 7000.00000 Infinite

(a) Suppose the risk index for the stock fund (the value of C) increases from its current value of 8 to 14. How does the optimal solution change, if at all? O The optimal solution becomes (9600, 3000). O The optimal solution does not change. (b) Suppose the risk index for the money market fund (the value of Cu) increases from its current value of 3 to 4.5. How does the optimal solution change, if at all? O The optimal solution becomes (9600, 3000). O The optimal solution does not change. (c) Suppose C, increases to 14 and Cy increases to 4.5. How does the optimal solution change, if at all? O The optimal solution becomes (9600, 3000). O The optimal solution does not change. Innis Investments manages funds for a number of companies and wealthy dients. The investment strategy is tailored to each dient's needs. for a new client, Innis has been authorized to invest up to $1.2 million in two investment funds: a stock fund and a money market fund. Each unit of the stock fund costs $50 and provides an annual rate of return of 10%; each unit of the money market fund costs $100 and provides an annual rate of return of 4%. The client wants to minimize risk subject to the requirement that the annual income from the investment be at least $60,000. According to Innis risk measurement system, each unit invested in the stock fund has a risk index of 8, and each unit invested in the money market fund has a risk index of 3. The higher risk index associated wth the stock fund simply indicates that it is the riskier investment. Innis's dient also specified that at least $300,000 bn invested in the money market fund. Refer to the computer solution shown below. optimal objetive Valun- 62000.00000 Variable Value 4000,000o0 10000. 00000 Reduced Cost 0.00000 0.00000 Constraint Slach/surplue 0.00000 Dual Value 0,00000 2.14447 7000.00000 0.00000 objective Coefrieient Allowable Variable Incresse Decrease E.00000 Intinite 4.25000 3.0000 3.40000 tstinite Allovable Allowable Canatraint Value Increase Decreane 1200000.0000 300000,00000 42000.00000 420000.00000 12000.00000 3000.00000 7000.00000 Infinite

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 34P

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