Exercise 1:

Mick Garcia, a certified financial planner (CFP) has been asked by a client to invest $250,000.
This money may be placed in stocks, bonds, or a mutual fund in real estate. The expected return
on investment is 13% for stocks, 8% for bonds, and 10% for real estate.
While the client would like a very high expected return, she would be satisfied with a 10%
expected return on her money. Due to risk considerations, several goals have been established to
keep the risk at an acceptable level. One goal is to put at least 30% of the money in bonds.
Another goal is that the amount of money in real estate should not exceed 50% of the money
invested in stocks and bonds combined. In addition to these goals, there is one absolute
restriction. Under no circumstances should more than $150,000 be invested in any one area.
(a) Formulate this as a goal programming problem. Assume that all of the goals are equally
important.
(b) Use any available software to solve this problem. How much money should be put in each of
the investment options? What is the total return? Which of the goals are not met?

Exercise 2:
An on-line grocery retailer must decide on how many of two types of picker to employ in order
to process customer orders. Novice pickers are paid £6 per hour and can process 20 orders per
hour. Experienced pickers are paid £10 per hour and can process 40 orders per hour. The retailer
has the following goals:
Goal 1: The retailer wishes to employ exactly 15 pickers.
Goal 2: The retailer wishes to process at least 500 orders per hour.
Goal 3: The retailer wishes for the total wage bill not to exceed £95 per hour.

a) Represent this situation graphically, marking the feasible region, the goals, and the deviational
variables on your graph.
b) Formulate this decision problem as goal programming with the following two priority levels:
Priority Level 1: Achieve goal 3.
Priority Level 2: Achieve goals 1 and 2 (equally weighted).
Exercise 3: A company produces three types of cup, termed grade A, grade B, and grade C.
Each grade A cup requires 2 h of furnace time and 3 h of finishing labour. Each grade B cup
requires three hours of furnace time and 5 h of finishing labour. Each grade C cup requires 4 h of
furnace time and 10 h of finishing labour. A grade A cups yields a profit of £1.00, a grade B cup
a profit of £1.50, and a grade B cup a profit of £2.20. The company currently has 1000 h of
furnace time and 2000 h of finishing labour per day. They have a high level of demand and
therefore they have a strategic aim of increasing production to 1000 cups per day by increasing
the level
of furnace and finishing hours available.

Represent this situation as a goal programming with the following priority structure:
Priority 1: Achieve the strategic aim of 1000 cups per day.
Priority 2: Achieve a profit of at least £1250.
Priority 3: Minimise the extra finishing and furnace hours needed.
Priority 4: Ensure that at least 300 of each type of cup is manufactured.