07 x1 011 x2 019 x3 015 x4 subject to x1 1 000 000 t

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Unformatted text preview: ld stocks X4 = dollars invested in construction loans 25 Investment Formulation International City Trust Objective: Maximize investment interest dollars earned = 0.07 X1 + 0.11 X2 + 0.19 X3 + 0.15 X4 subject to: X1 ≤1, 000, 000 T X2 ≤ 2, 500, 000 B X3 ≤1, 500, 000 G X4 ≤1,800, 000 C (Maximum investment amount for each type) (At least 55% in gold stock and construction loans) (At least 15% in trade T ≥ 0.15 1 T 2+ X+G X1 ≥ 0.15(X(+X+ B 3+X4)+ C ) credit) (Budget of investment) T + + X + +≤ ,000,000 X +XB +G X C5≤ 5, 000, 000 X3+XC ≥ 0.55+X2+ X3+XG +C ) G + 4 ≥ 0.55(X1 ( T + B + 4) 1 2 3 4 T , B, G , C ≥ 0 X1, X2 , X3, X4 ≥ 0 26 Rewriting Last Two Constraints Rewrite X3+X4 > 0.55(X1+X2+ X3+X4) as: − 0.55 X1 − 0.55 X2 + 0.45 X3 + 0.45 X4 ≥ 0 and rewrite (At least 55% in gold stock and construction loans) X1 > 0.15(X1+X2+ X3+X4) as: 0.85 X1 − 0.15 X2 − 0.15 X3 − 0.15 X4 ≥ 0 (At least 15% in trade credit) 27 Optimal Portfolio The maximum interest earned is $712,000 by investing in the following: • Trade credit: $750,0...
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This note was uploaded on 11/04/2012 for the course IS CB2505 taught by Professor Tommylau during the Spring '12 term at City University of Hong Kong.

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