Personal Finance Problem - Linear Programming
PERSONAL FINANCIAL INVESTMENT STRATEGY ANALYSIS
[pic]
PROBLEM:
Bob and Pina Ing, 31 and 28, a newly-wed couple found themselves in the midst of an interesting decision making problem. It appeared that their fortune had turned overnight when they won a mega lottery and received one million dollars after tax in price money. They were confused about how to invest their money, such that it gives them the maximum return on their investment. The couple consulted Jayhawks Financial Services LLC (JFS) to prepare a personal investment portfolio for them.
ASSUMPTIONS and KEY FACTS:
Bob is a very enthusiastic person and he wants to make the maximum out of the investments. He is willing to put all of this money in equity market. However, he is aware that concentrating the investments in one particular stock increases the risk and he understands the importance of diversification. After talking to JFS consultants, he is convinced that it would be a good idea to diversify his securities and equities investments in three categories: lump-sum stocks, government bonds and high growth mutual funds. But, he is not sure of how much money he should invest in each category. He gave the guidelines that at least 10% of the total money should be invested in each of those options and the investment in any of the above category should not exceed 40% of the total investment. He also mentioned that investment in mutual funds should be at least twice the amount invested in stocks.
Pina, on the other hand is more interested in investing in precious metals like gold and silver. She has seen that the growth in these commodities had shown remarkable returns over past few years, but she is not sure how risky that investment would be. So, they decided that their investment in precious metals should not exceed 15% of their total investment. She also believed that she should not be very aggressive when it comes to investing and found her comfort zone in FDIC insured savings account
[pic]
PROBLEM:
Bob and Pina Ing, 31 and 28, a newly-wed couple found themselves in the midst of an interesting decision making problem. It appeared that their fortune had turned overnight when they won a mega lottery and received one million dollars after tax in price money. They were confused about how to invest their money, such that it gives them the maximum return on their investment. The couple consulted Jayhawks Financial Services LLC (JFS) to prepare a personal investment portfolio for them.
ASSUMPTIONS and KEY FACTS:
Bob is a very enthusiastic person and he wants to make the maximum out of the investments. He is willing to put all of this money in equity market. However, he is aware that concentrating the investments in one particular stock increases the risk and he understands the importance of diversification. After talking to JFS consultants, he is convinced that it would be a good idea to diversify his securities and equities investments in three categories: lump-sum stocks, government bonds and high growth mutual funds. But, he is not sure of how much money he should invest in each category. He gave the guidelines that at least 10% of the total money should be invested in each of those options and the investment in any of the above category should not exceed 40% of the total investment. He also mentioned that investment in mutual funds should be at least twice the amount invested in stocks.
Pina, on the other hand is more interested in investing in precious metals like gold and silver. She has seen that the growth in these commodities had shown remarkable returns over past few years, but she is not sure how risky that investment would be. So, they decided that their investment in precious metals should not exceed 15% of their total investment. She also believed that she should not be very aggressive when it comes to investing and found her comfort zone in FDIC insured savings account