ccrocker23
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- Jan 23, 2016
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Hello I am struggling with figuring out how to input the risk index part of this question.
Innis Investments manages funds for a number of companies and wealthy clients. The investment strategy is tailored to each client's needs. For a new client, Innis has been authorized to invest up to 1.2 million dollars in two investment funds: a stock fund and a money market fund. Each unit of the stock fund costs $50 and provides an annual rate of return of 10% while each unit of the market funds cost $100 dollars and provides an annual rate of return of 4%.
The client wants to minimize risk subject to the requirement that the annual income from the investment be at least $60,000. According to Innis's risk measurement system, each unit invested in the stock fund has a risk index of 8; and each unit invested in the money market fund has a risk index of 3; the higher risk index associated with the stock fund simply indicates that it is the riskier investment. Innis's client also specifies that at least $300,000 be invested in the money market fund.
How many units of each fund innis should purchase for the client to minimize the total risk index for the porfolio
How much annual income will this investment strategy generate?
Suppose the client desires to maximize annual return. How should the funds be invested?
s.t
50x +100y <1200000
100y < 300000
Plz help thank you explain what you can. I really just don't understand the risk index part.
Innis Investments manages funds for a number of companies and wealthy clients. The investment strategy is tailored to each client's needs. For a new client, Innis has been authorized to invest up to 1.2 million dollars in two investment funds: a stock fund and a money market fund. Each unit of the stock fund costs $50 and provides an annual rate of return of 10% while each unit of the market funds cost $100 dollars and provides an annual rate of return of 4%.
The client wants to minimize risk subject to the requirement that the annual income from the investment be at least $60,000. According to Innis's risk measurement system, each unit invested in the stock fund has a risk index of 8; and each unit invested in the money market fund has a risk index of 3; the higher risk index associated with the stock fund simply indicates that it is the riskier investment. Innis's client also specifies that at least $300,000 be invested in the money market fund.
How many units of each fund innis should purchase for the client to minimize the total risk index for the porfolio
How much annual income will this investment strategy generate?
Suppose the client desires to maximize annual return. How should the funds be invested?
s.t
50x +100y <1200000
100y < 300000
Plz help thank you explain what you can. I really just don't understand the risk index part.