An investor is considering allocating $10,000 among five investment alternatives.

Q3. An investor is considering allocating $10,000 among five investment alternatives. The five alternatives and their respective fund categories, risk levels, and average annual returns are shown below: Name of Fund Category of Fund Risk Level Average Annual Return Adams Money Market Fund 1 4.50% Barney Money Market Fund 2 5.62% Chilton Bond Fund 2 6.80% Dunster Bond Fund 3 10.15% Excelsior Aggressive Growth Fund 5 20.60% The risk level of each investment is rated on a scale of 1 to 5, where 1 is very conservative and 5 is very risky. The investor would like to maximize the average annual return on his investment subject to the following restrictions: 1. The average risk level of the entire investment should not exceed 2.5. 2. At least 30% of the investment should be placed in money market funds. 3. At most $2,000 should be invested in the aggressive growth fund. Construct and solve a linear optimization model to determine the optimal allocation of the investor’s money.

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Regards,

Cathy, CS.