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Math Help - George Johnson recently inherited ...

  1. #1
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    George Johnson recently inherited ...

    Having some issues with this problem from my management science class problems.

    It doesn't ask for the objective f(x), but would it be .06b+.1(t-b)
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  2. #2
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    Re: George Johnson recently inherited ...

    Quote Originally Posted by Efrem View Post
    Having some issues with this problem from my management science class problems.

    It doesn't ask for the objective f(x), but would it be .06b+.1(t-b)
    Please give a more complete statement of the problem. Virtually no information is given that would allow anyone to answer the question.
    Last edited by JeffM; February 22nd 2014 at 09:03 AM. Reason: modified "complete" with "more."
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  3. #3
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    Re: George Johnson recently inherited ...

    25. George Johnson recently inherited a large sum of money; he wants to use a portion of this money to set up a trust fund for his two children. The trust fund has two investment op- tions: (1) a bond fund and (2) a stock fund. The projected returns over the life of the in- vestments are 6% for the bond fund and 10% for the stock fund. Whatever portion of the inheritance he finally decides to commit to the trust fund, he wants to invest at least 30% of that amount in the bond fund. In addition, he wants to select a mix that will enable him to obtain a total return of at least 7.5%.
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  4. #4
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    Re: George Johnson recently inherited ...

    Assuming t is the amount invested in the trust and b is the portion invested in bonds, then 0.06b + 0.1(t - b) represents the projected total return and would make a plausible objective function. It makes sense to want to maximize projected return subject to some bound on risk. However, the same expression will also appear in one of the constraints. Does this help?
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  5. #5
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    Re: George Johnson recently inherited ...

    yes it does thanks!
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