Reference no: EM132208141

Question - J. D. Williams, Inc, is an investment advisory firm. The company uses an asset allocation model that recommends the portion of each client's portfolio to be invested in a growth stock fund, an income fund, and an ETF (or exchange-traded fund). To maintain diversity in each client's portfolio, the firm places limits on the percentage of each portfolio that may be invested in each of the three funds. General guidelines indicate that the amount invested in the growth fund must be between 20% and 40% of the total portfolio value. Similar percentages for the other two funds stipulate that between 20% and 50% of the total portfolio value must be in the income fund, and at most 10% of the total portfolio value must be in the ETF.

Williams has just contracted with a new client who has $800,000 to invest. Williams is currently forecasting annual yields of 18% for the growth fund, 12.5% for the income fund, and 11% for the ETF. Based on the information provided, how should the new client be advised to allocate the $800,000 among the growth, income, and ETF? Develop a linear programming model that will provide the maximum yield for the portfolio.

Formulate a linear programming model for maximizing the investment return. What amounts should be invested in the 3 investment options to maximize projected return from the available $800,000? What is the projected return of this portfolio?