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Old 07-23-2010, 08:48 AM
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Join Date: Jul 2010
Location: India
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Default Please Help with a linear programming investor math problem?

The book does not help me figure out this problem.
An investor has decided to commit no more than Rs.160,000 to the purchase of the common stocks of two companies, company X and company Y. She has also estimated that there is a chance of at most 1% capital loss on her investment in company X and chance of at most 5% loss on company Y, She has decided that these losses should not exceed Rs.4900. On the other hand, She expects to make a 11% profit from company X and 13% from company Y. Determine how much he should invest in stock of each company in order to maximize his investment returns in company X and company Y.

I got as far as figuring out this much:

Let company X be A
Let company Y be B
Investment return H = (0.11)A + (0.13)B

How do I set this problem up and solve?




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Thanks & Regards
Jacklin Jonse
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Old 09-12-2010, 12:58 PM
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Join Date: Sep 2010
Location: sao pualo/sp brazil
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Default Re: Please Help with a linear programming investor math problem?

Well, im no expert in finance but this looks like Solver problem to me, where u have to maximize H = (0.11)A + (0.13)B given the restriction (0.01)*A + (0.05)*Y <= 4900 and A + B = 1

Then you use solver to determine how much of her capital to alocate in A and B.
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