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Jeff is willing to invest $6,000 in buying shares and bonds of a company to gain...

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Statistics

Jeff is willing to invest $6,000 in buying shares and bonds of acompany to gain maximum returns. From his past experience, heestimates the relationship between returns and investments made inthis company to be:

R = –2S2 – 9B2– 4SB + 20S + 30B.       

where,
R = total returns in thousands of dollars
S = thousands of dollars spent on Shares
B = thousands of dollars spent on Bonds
Jeff would like to develop a strategy that will lead to maximumreturn subject to the restriction provided on the amount availablefor investment.

a. What is the value of return if $4,000 is invested in sharesand $2,000 is invested bonds of the company?
b. Formulate an optimization problem that can be solved to maximizethe returns subject to investing no more than $6,000 on both sharesand bonds.
c. Determine the optimal amount to invest in shares and bonds ofthe company. How much return will Jeff gain? Round all your answersto two decimal places.

Answer & Explanation Solved by verified expert
4.0 Ratings (792 Votes)
aThe returns is given by R 2S2 9B2 4SB 20S 30 B soif S 4000 and B 2000 then the return will be 2 4000 4000 9 2000 2000 4 4000 2000 20 4000 30 200099860000bThe problem    See Answer
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