Your portfolio manager has suggested two high-yielding stocks: (MO) and (RJR).
Each MO share costs $50, yields 4.5 % in dividends, and has a risk index of 2.0. Each RJR share costs $55, yields 5% in dividends, and has a risk index of 3.0. You have up to $12,100 to invest and would like to earn at least $550 in dividends. How many shares (to the nearest tenth of a unit) of each stock should you purchase, to meet your requirements and minimize the total risk index for your portfolio? What is the minimum total risk index?
1. indicate the objective function and all the constraints?
2. How many shares of each stock should you purchase in order to minimize the total risk index for your portfolio?
3. What is the minimum total risk index?