Financial Analysts, Inc., is an investment firm that manages stock portfolios for a number of clients. A new client has requested that the firm handle an $800,000 portfolio. As an initial investment strategy, the client would like to restrict the portfolio to a mix of the following two stocks:
Stock Price share Estimated annual share return
Oil alaska $50 $6
Southwest petroleum $30 $4
Let
x = number of shares of Oil Alaska
y = number of shares of Southwest Petroleum
Required:
a. Develop the objective function, assuming that the client desires to maximize the total annual return.
b. Show the mathematical expression for each of the following three constraints:
1. Total investment funds available are $800,000.
2. Maximum Oil Alaska investment is $500,000.
3. Maximum Southwest Petroleum investment is $450,000.
Answers: 2
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