Portfolio Selection (Blending example) Suppose that you have $10,000 to invest and have identified the following possibilities: Investment choices Annual Return Beta Risk Treasury Bonds 5% 0.1 Municipal Bonds 7% 0.3 Proctor & Gamble stock 11% 1.4 General Motors stock 12% 1.8 Intel stock 14% 2.5 You wish to have at least $2000 in bonds, in order to diversify your portfolio. You have decided that your portfolio risk should not exceed 1.5. You wish to determine how much to invest in each choice, in order to maximize your total annual return from the investments. (Note: Portfolio risk is a weighted average of the risks of the individual investments.) Personnel Scheduling (Covering example) The transportation department of a small town would like to develop a schedule for its bus drivers. Each driver works five consecutive days, then gets two days off. A driver may start work on any day of the week. The requirements for bus drivers on each day of the week is as follows: Day of Week Mon Tues Wed Thur Fri Sat Sun
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