Determine the optimum portfolio for richard

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Reference no: EM132252214

Richard Banks is trying to determine how to invest a $400,000 windfall that he received as an inheritance from a distant relative. Four different investments are being considered: Bonds, Common Stock, Futures, or Real Estate.

The annual rates of return on each investment are expected to be the following: Bonds, 10%; Common Stocks, 7%; Futures, 12%; and Real Estate, 15%.

To ensure that his portfolio is not too risky, Richard has set the following requirements to ensure a diverse portfolio:

• The amount invested in Bonds must not exceed the amount invested in Common Stock

• The amount invested in Futures must be at least 10% of the portfolio

• No more than 50% of the portfolio can be in Real Estate.

Write the LP formulation to determine the optimum portfolio for Richard.

Reference no: EM132252214

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