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| What am I trying to Min/Max here? LINEAR PROGRAMMING |
AegisRose |
09/22/04 |
Here is the information I've been given. I cannot figure out what or how to figure out what I'm maximizing/minimizing with the info given. I'm pretty much totally lost with this one. =(
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Pfeiffer has assigned Hartmann’s portfolio a risk index of .05. Furthermore, to maintain diversity, the fraction of Hartmann’s portfolio invested in the growth and income funds must be at least 10% for each, and at least 20% must be in the money market fund.
The risk ratings for the growth, income, and money market funds are 0.10, 0.06, and 0.01, respectively. A portfolio risk index is computed as a weighted average of the risk ratings for the three funds where the weights are the fraction of the portfolio invested in each of the funds. Hartmann has given Pfeiffer $300,000 to manage. Pfeiffer is currently forecasting a yield of 20% on the growth fund, 10% on the income fund, and 6% on the money market fund.
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Clarification/Follow-up by Chip_Eastham on 10/12/04 3:09 pm:
It's a guess, but the problem is perhaps a linear programming one in which the yield is to be maximized, through a selection of fund allocations, subject to the risk and diversity constraints.
Does this help?
regards,
Chip
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