The Investment Problem of PP
To control the risk, management has decided that:
1. The total amount invested in high-risk funds must be between 50% and
75% of the total invested.
2. The total amount invested in medium-risk funds must be between 20%
and 30% of the total invested.
3. The amount invested in the low-risk fund must be at least 5%.
To diversify, management has also specified the following guidelines:
4. The amount invested in the high-risk Funds 1, 2, and 3 should be in the
ratio 1:2:3.
5. The amount invested in the medium-risk Funds 4 and 5 should be in
the ratio 1:2.
How should the $1,000,000 be invested to maximize the expected rate of
return (%) and satisfy all of the investment guidelines?