9781118041581

738 Chapter 17 Linear Programming

TABLE 17.3

Linear Programming Solutions for an Optimal Portfolio

By dividing funds among treasury bills, treasury bonds, and junk bonds, the investor earns a maximum

expected return (6.23 percent) while meeting three investment requirements.

ABC DEFGHIJKLM

1

2 T-Bills T-Bonds Corp Bonds Munis Junk Portfolio Requirement Gap Shadow

3 Price

4 Proportions0.260 0.365 0 0 0.375 1

5

6 Returns 4 6 4.4 5.6 8 6.23

7

8 Ratings 5 5 3.5 3 1 3.5 3.5 0 0.708

9

10 1.5 1 0

11 Maturities 0.4 4 3.2 2 2.5 2.5

12 2.5 0 0.555

13

Set Target Cell:

Solver Parameters?

$H$6

$B$4 : $F$4

Equal to:

By Changing Cells:

Subject to Constraints:

Add

Change

Delete

Solve

Close

Options

Max Min

$K$8 : $K$12 ≥ 0

$H$4 = 1

$B$4 : $F$4 ≥ 0

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