View the step-by-step solution to:

# Use Excel Investment Advisors, Inc., is a brokerage firm that manages stock portfolios for a number of clients. A particular portfolio consists of U...

Use Excel
Investment Advisors, Inc., is a brokerage firm that manages stock portfolios for a number of clients.  A particular portfolio consists of U shares of U.S. Oil and H shares of Huber Steel.  The annual return for U.S. Oil is \$3 per share and the annual return for Huber Steel is \$5 per share.  U.S. Oil sells for \$25 per share and Huber Steel sells for \$50 per share.  The portfolio has \$80,000 to be invested.  The portfolio risk index (0.50 per share U.S. Oil and 0.25 per share for Huber Steel) has a maximum of 700.  In addition, the portfolio is limited to a maximum of 1000 shares of U.S. Oil.  The linear programming formulation that will maximize the total annual return of the portfolio is as follows:
Max z = 3U + 5H
Subject to:
25U +  50H ≤ 80,000  Funds available
0.50U + 0.25H ≤  700  Risk maximum
1U  ≤  1000  U.S. Oil maximum
U, H ≥ 0
Solve the problem using Excel Solver.
a)  What is the optimal solution, and what is the value of the total annual return?
b)  Which constraints are binding?  What is your interpretation of these constraints in terms of the problem?
c)  What are the shadow prices for the constraints?  Interpret each.
d)  Would it be beneficial to increase the maximum amount invested in U.S. Oil?  Why or why not?

### Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

### -

Educational Resources
• ### -

Study Documents

Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

Browse Documents