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Solve for:
1. How much should be invested for each
stock?
2. What is the average risk for this
investment?
3. What is the estimated return for this
investment?
QM for Windows
P = Petrochemical / U = Utility
Maximize: Estimated % return for each stock
Total Investment: 1P + 1U = $50,000
Risk Index: 9P + 4U $300,000 because the average risk index should
not be higher than 6.
(9P + 4U)/$50,000 6 [$50,000 x 6 = $300,000]
Estimated Return: .12P + .06U $6,000
[$6,000 would be the maximum return possible]
Kelly Devilbiss - Problem 7-20