Problem 11-3 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 $55,000 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 12%, while the blue chip fund has a projected annual return of 9%. the investment advisor requires that at most $25,000 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 5 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 5(10) + 5(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 250.
(a) formulate a linear programming model to find the best investment strategy for this client. let i = internet fund investment in thousands b = blue chip fund investment in thousands if required, round your answers to two decimal places. i + b s.t. i + b available investment funds i + b maximum investment in the internet fund i + b maximum risk for a moderate investor i, b 0
(b) build a spreadsheet model and solve the problem using solver. what is the recommended investment portfolio for this client? internet fund = $ blue chip fund = $ what is the annual return for the portfolio? $
(c) suppose that a second client with $55,000 to invest has been classified as an aggressive investor. b&r recommends that the maximum portfolio risk rating for an aggressive investor is 310. what is the recommended investment portfolio for this aggressive investor? internet fund = $ blue chip fund = $ annual return = $
(d) suppose that a third client with $55,000 to invest has been classified as a conservative investor. b&r recommends that the maximum portfolio risk rating for a conservative investor is 150. develop the recommended investment portfolio for the conservative investor. internet fund = $ blue chip fund = $ annual return = $