Explanation of Solution
Formulation of a Linear
From the given information, let consider “x1” bet the amount of money invested in bond 1, “x2” bet the amount of money invested in bond 2, “x3” bet the amount of money invested in bond 3, “x4” bet the amount of money invested in bond 4.
The objective is to maximize the expected return on its investments.
Therefore, the objective function is,
Maximize
Constraint 1:
At least, 8% must be the worst-case return of the bond portfolio.
Constraint 2:
At most, the average duration of the bond portfolio must be 6
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Chapter 3 Solutions
Student Suite Cd-rom For Winston's Operations Research: Applications And Algorithms
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- Operations Research : Applications and AlgorithmsComputer ScienceISBN:9780534380588Author:Wayne L. WinstonPublisher:Brooks Cole