Question

Financial Analysts, an investment firm, manages stock portfolios. The firm is considering investing in two stocks for a particular client. The client has a total of $60,000 to invest. Oil Alaska shares cost $30 per share. Southwest Petroleum shares cost $40 per share. Oil Alaska returns $6 per share per year and Southwest Petroleum returns $5 per share per year. Which of the following statements is true about Financial Analysts’ portfolio optimization problem? (Assume X1 = Oil Alaska shares and X2 = Southwest Petroleum shares).

• A. The objective function minimizes 30X1 + 40X2

• B. The objective function maximizes 30X1 + 40X2

• C. 30X1 + 40X2 ≤ 60,000 is a constraint of the problem

• D. 6X1 + 5X2 ≤ 60,000 is a constraint of the problem

Answer 1