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LINEAR PROGRAMMING, EXCEL SOLVER An investor has $20,000 to invest in a portfolio of three accounts....

LINEAR PROGRAMMING, EXCEL SOLVER

An investor has $20,000 to invest in a portfolio of three accounts. Account 1 offers a return of 2% and at a low risk. Account 2 offers a return of 4% and has a medium risk. Account 3 offers a return of 5% but at a relatively high risk. He decides to invest no more than $3000 in Account 3 and at least twice as much in Account 1 the investment in 2.

a. Formulate this as a linear programming problem (i.e. specify constraint equations and an objective function aimed at maximizing the overall return on investment)

b. Specify this problem in Microsoft Excel

c. Use Excel’s solver add-in to determine what amounts should be invested in each account in order to maximize the year end return?

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Answer #1

Now input this into excel. Use solver from the Data windowAfter solving we get the values in the highlighted box.

Hence investments will be as follows

Account 1- $0

Account 2- $17000

Account 3- $3000

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