PORTFOLIO ANALYSIS. Sarah Williams has $1 0 0 ,0 0 0 to allocate to the investments listed in the following table. Bill Wallace, her investment counselor, has prepared the following estimates for the potential annual return on each investment.
Sarah wishes to invest her money in such a way as to maximize her expected annual return based on Bill Wallace’s projections, with the following restrictions:
• At most $50,000 of her investment should be in stocks.
• At least $60,000 of her investment should have the potential of earning a 9% or greater annual return.
• At least $70,000 should be liquid during the year; this implies that at most $30,000 can be in two-year Treasury bonds.
• The minimum overall annual return should be at least 4%.
• All $100,000 is to be invested.
Assume that the investments will perform independently of one another so that the returns on the investment opportunities are uncorrelated. Formulate and solve a linear program for Sarah.