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An Investment Strategy Restricts the Portfolio to a Mix of Two

Question 1

Multiple Choice

An investment strategy restricts the portfolio to a mix of two stocks A and B with the following price/share and annual returns:
 Stock  Price/Share  Annual Return A$355% B$457%\begin{array}{ccc}\text { Stock } & \text { Price/Share } & \text { Annual Return } \\ \mathrm{A} & \$ 35 & 5 \% \\\mathrm{~B} & \$ 45 & 7 \%\end{array}

Assume that the maximum amount available for investment is $100,000 with the following 2 prioritized investment goals:
Rank R1: Obtain an annual return of at least 6%.
Rank R2: Limit the investment in stock B to no more than 55% of the total investment.
Assume X? = dollar amount allocated to stock A,and X? = dollar amount allocated to stock B.
What is the objective function?


A) Min d?? + d??
B) Min R?(d??) + R?(d??)
C) Min R?(d??) - R?(d??)
D) Min R?(d??) + R?(d??)
E) Min R?(d??) + R?(d??)

Correct Answer:

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