Question

An investment company is looking for new opportunity to invest up to 4 million dollars for one year in international shares, CO2 futures, gold and Australian governmental bonds. The projected annual return on the investment in the international shares is 3%, CO2 futures are 2%, gold is 1.5%, and the Australian governmental bond is 1.8%. In anticipation of financial markets’ rebound, the company’s management imposed the following recommendations:

- The international shares and CO2 futures must not receive more than 60% of the total investment;

- Investment in CO2 futures and gold must not exceed 2 million dollars;

- No more than 40% of the funds invested in CO2 futures and gold can be invested in the Australian governmental bonds;

- No more than 25% of the funds invested in CO2 futures and the Australian governmental bonds can be invested into the international shares.

Formulate the linear program to maximize the projected annual return on the investment portfolio.

Answer 1

Linear program:

Formulas:

Solver:

Maximum return = 2.04% of the amount invested