An investor is looking to invest R 250,000 with theintent of getting the highest possible return. He plans todo this by holding a diverse stock portfolio with differenthypothetical stocks with varying expected returns asseen in the table below.StockReturn earnedNaspers6%Sasol15%ABSA9.Capitec3%To control for risk, the following constraints are put intoplace:a) No more than 15% of the total investment can be putinto ABSA stocks.b) At most 40% must be invested in Sasol stocks andthe Capitec stocks combined.c) The amount put in Naspers stocks must be no morethan the amount invested into all the other remainingstocks combined.d) All the R250,000 must be invested and no shorting isallowed.Formulate a linear programming model for this problemto get the highest return (i.e., Define and outline yourdecision variables, objective function and constraints).How much of the budget should be invested into eachinvestment option? (Show your workings in MicrosoftExcel)

Given data is Available amount to invest = R 250,000 Limit to invest in ASBA stock = less than or…

Answered: An investor is looking to invest R…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section9.4: The Precision Tree Add-in

Problem 9P

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