Question

An investor has up to $90000 to invest in three types of investments.Type A investment pay 12% annually and have a risk factor of 0. Type B investment pay 20% annually and have a risk factor of 0.06. Type C investment pay 24% annually and have a risk factor of 0.08. To hv a well balanced portfolio , the investor imposes some conditions.The everage risk factor should not be greater than 0.10. Morever, at least one-third of the total portfolio is to be allocated to type A investment.How much should the investor allocate to each type of investment to obtain a maximum return? (NB: Use simplex method to solve this problem)

Answer 1

So, assuming you know about the simplex method, just set up your restraints and the target function.

A+B+C <= 90000
A >= 30000
and so on

the return will of course be the weighted sum of the expected individual returns.