Show cells in excel with step by step using solver and the sum product function show how to calculate weighted risk Wall Street firms commonly use linear programming models to select their bond portfolios. A firm is considering the following 5 bonds: Bond Annual Return rate (%) Risk measure Bond 9.2 5 Bond 5 3 Bond 6.1 2 Bond 3.5 4 Bond 1.2 1 In the table above, “risk measure” has a value between 1 and 5 with 5 indicating the riskiest bond and 1 the least risky bond. The firm has a budget of 1 million dollars for this investment. The firm wants to decide its investments in the 5 bonds to maximize the expected return of the portfolio, subject to constraints listed below: The weighted average risk of the portfolio should not exceed 4. At least 30% of the total investment can be invested in bond 3. To diversify the portfolio, the investment on each bond should be at least 10% of the total investment. The sum of investments made in bond 2 and bond 4 must be at least equal to the investment made in bond 1. Total investment must not exceed the budget.

Show cells in excel with step by step using solver and the sum product function show how to calculate weighted risk Wall Street firms commonly use linear programming models to select their bond portfolios. A firm is considering the following 5 bonds: Bond Annual Return rate (%) Risk measure Bond 9.2 5 Bond 5 3 Bond 6.1 2 Bond 3.5 4 Bond 1.2 1 In the table above, “risk measure” has a value between 1 and 5 with 5 indicating the riskiest bond and 1 the least risky bond. The firm has a budget of 1 million dollars for this investment. The firm wants to decide its investments in the 5 bonds to maximize the expected return of the portfolio, subject to constraints listed below: The weighted average risk of the portfolio should not exceed 4. At least 30% of the total investment can be invested in bond 3. To diversify the portfolio, the investment on each bond should be at least 10% of the total investment. The sum of investments made in bond 2 and bond 4 must be at least equal to the investment made in bond 1. Total investment must not exceed the budget.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter11: Simulation Models

Section11.3: Financial Models

Problem 26P

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