A person wants to invest $10,000 into stocks: a high techcompany (T) with an expected annual return of 12% and a risk indexof 8; and a regulated power company (P) with an expected annualreturn of 6% and a risk index of 2. To limit risk, the combinedportfolio risk must be no more than 6 and the proportion ofinvestment in T must be less than 60%. Find the portfolio that willmaximize the annual return R while meeting the risklimitations.
a. Formulate the Investment Portfolio problem with therequirement of investing up to $10,000, and solve itgraphically.
b. Compute the increase in annual return if the total investmentis increased by $1,000.
c. Compute the increase in annual return if the constraint ofportfolio risk index is increased from 6 to 7.
