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...


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 $50,000 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 percent, and the Blue
Chip fund has a projected annual return of 9 percent. The investment advisor requires that
at most $35,000 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 6 per $1,000 invested.
The Blue Chip fund has a risk rating of 4 per $1,000 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
6(10) 1 4(10) 5 100. 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 240.


a. Formulate a linear programming model to find the best investment strategy for this
client.


Jun 09, 2022
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