Answered: d. What is the rate of return for the…

d. What is the rate of return for the portfolio? e. What is the dual value for the funds available constraint? f. What is the marginal rate of return on extra funds added to the portfolio?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter11: Simulation Models

Section: Chapter Questions

Problem 66P: Rework the previous problem for a case in which the one-year warranty requires you to pay for the...

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Concept explainers

Optimization Models

Optimization models are mathematical models that help organizations determine the best way to allocate scarce resources to achieve specific objectives. These models can be used to solve a wide variety of problems, from finding the most efficient route for a delivery truck to determining the optimal mix of products to stock in a store.

Question

I need help with d, e, and f. I already did a, b, and c.

You do not need to use Solver or solve the problems. Just respond to the problem questions using the outputs provided in the problem. A picture in the attach image is a complete question.

1. Recall the Innis Investments problem (Chapter 2, Problem 39). Letting

S= units purchased in the stock fund

M= units purchased in the money market fund

leads to the following formulation:

Min 8S + 3M

s.t.

50S + 100M≤ 1,200,000 funds available

5S + 4M≥ 60,000 Annual income

M≥ 3,000 Units in money market

S, M≥ 0

a. What is the optimal solution, and what is the minimum total risk?

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b. Specify the objective coefficient ranges.

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c. How much annual income will be earned by the portfolio?

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d. What is the rate of return for the portfolio?

e. What is the dual value for the funds available constraint?

f. What is the marginal rate of return on extra funds added to the portfolio?

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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