Linear Programming Case Study

Linear Programming Case Study

Project description
Week 8 Project
You are a portfolio manager for the XYZ investment fund. The objective for the fund is to maximize your portfolio returns from the investments on four alternatives.

The investments include (1) stocks, (2) real estate, (3) bonds, and (4) certificate of deposit (CD). Your total investment portfolio is $1,000,000.
Investment Returns
Based on the returns from the past five years, you concluded that the investment annual returns on stocks are 10%, on real estates are 7% on bonds are 4% and on CD is

1%.
Risk Constraints
However, you also have to analyze the risks associate with each investment category. A wildly used risk measurement parameter is called Value at Risk (VaR). (Note: VaR

measures the risk of loss on a specific portfolio of financial assets.) For example, given a million dollar stock investment, if a portfolio of stocks has a one-day 4%

VaR, there is a 5% probability that the stock portfolio will fall in value by more than 1,000,000 * 0.004 = $4,000 over a one day period. In the portfolio, the VaR for

stock investments is 6%. Similarly, the VaR for real estate investment is 2% and the VaR for bond investment is 1% and the VaR for investment in CD is 0%. To manage

the portfolio, you decided that at 5% probability, your VaR for stocks cannot exceed $25,000, VaR for real estate cannot exceed $15,000, VaR for bonds cannot exceed

$2,500 and the VaR for CD investment is $0.
Diversification and Liquidity Constraints
As a diversified investment portfolio, you also decided that each investment category must hold at least $50,000 of the total investment assets. In addition, you must

hold combined CD and bond investment no less than $200,000 in order to meet liquidity requirement.
The total amount of real estate holding shall not exceed 30% of the portfolio assets.
A. As a portfolio manager, please formulate and solve the investment portfolio problem using linear programming technique. What are the amounts invest in (1) stocks,

(2) real estate, (3) bonds and (4) CD?
B. If $500,000 additional investments are available to you in your portfolio, how would you invest the capital?
C. Would you maintain the portfolio investment if stock yields lowered to 6%? How would you re-distribute your investment portfolio?

Week 8 Project
You are a portfolio manager for the XYZ investment fund. The objective for the fund is to maximize your portfolio returns from the investments on four alternatives.

The investments include (1) stocks, (2) real estate, (3) bonds, and (4) certificate of deposit (CD). Your total investment portfolio is $1,000,000.
Investment Returns
Based on the returns from the past five years, you concluded that the investment annual returns on stocks are 10%, on real estates are 7% on bonds are 4% and on CD is

1%.
Risk Constraints
However, you also have to analyze the risks associate with each investment category. A wildly used risk measurement parameter is called Value at Risk (VaR). (Note: VaR

measures the risk of loss on a specific portfolio of financial assets.) For example, given a million dollar stock investment, if a portfolio of stocks has a one-day 4%

VaR, there is a 5% probability that the stock portfolio will fall in value by more than 1,000,000 * 0.004 = $4,000 over a one day period. In the portfolio, the VaR for

stock investments is 6%. Similarly, the VaR for real estate investment is 2% and the VaR for bond investment is 1% and the VaR for investment in CD is 0%. To manage

the portfolio, you decided that at 5% probability, your VaR for stocks cannot exceed $25,000, VaR for real estate cannot exceed $15,000, VaR for bonds cannot exceed

$2,500 and the VaR for CD investment is $0.
Diversification and Liquidity Constraints
As a diversified investment portfolio, you also decided that each investment category must hold at least $50,000 of the total investment assets. In addition, you must

hold combined CD and bond investment no less than $200,000 in order to meet liquidity requirement.
The total amount of real estate holding shall not exceed 30% of the portfolio assets.
A. As a portfolio manager, please formulate and solve the investment portfolio problem using linear programming technique. What are the amounts invest in (1) stocks,

(2) real estate, (3) bonds and (4) CD?
B. If $500,000 additional investments are available to you in your portfolio, how would you invest the capital?
C. Would you maintain the portfolio investment if stock yields lowered to 6%? How would you re-distribute your investment portfolio?

PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT 🙂

Calculate your order
275 words
Total price: $0.00

Top-quality papers guaranteed

54

100% original papers

We sell only unique pieces of writing completed according to your demands.

54

Confidential service

We use security encryption to keep your personal data protected.

54

Money-back guarantee

We can give your money back if something goes wrong with your order.

Enjoy the free features we offer to everyone

  1. Title page

    Get a free title page formatted according to the specifics of your particular style.

  2. Custom formatting

    Request us to use APA, MLA, Harvard, Chicago, or any other style for your essay.

  3. Bibliography page

    Don’t pay extra for a list of references that perfectly fits your academic needs.

  4. 24/7 support assistance

    Ask us a question anytime you need to—we don’t charge extra for supporting you!

Calculate how much your essay costs

Type of paper
Academic level
Deadline
550 words

How to place an order

  • Choose the number of pages, your academic level, and deadline
  • Push the orange button
  • Give instructions for your paper
  • Pay with PayPal or a credit card
  • Track the progress of your order
  • Approve and enjoy your custom paper

Ask experts to write you a cheap essay of excellent quality

Place an order

Order your essay today and save 7% with the discount code DISSERT7