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[Solved] Intel Investments, Inc. manages funds for a number of companies and wealthy clients

Intel Investments, Inc. manages funds for a number of companies and wealthy clients. The investment strategy is tailored to each client’s needs. For a new client, Intel has been authorized to invest up to $1.5 million in two investment funds: a high-risk stock fund and a low-risk money market fund. Each unit of the stock fund costs $200 and provides an annual rate of return of 20%; each unit of the money market fund costs $300 and provides an annual rate of return of 3%. The client is content with minimizing risk subject to the requirement that the annual income from the investment be at least $200,000. According to Intel’s risk measurement system, each unit invested in the stock fund has a risk index of 10, and each unit invested in the money market fund has a risk index of 6. Intel’s client also specified that at least $500,000 has to be invested in the money market fund.

Letting,

S = units purchased in the stock fund

M = units purchased in the money market fund

Leads to the following formulation:

Min 10S + 6M

s.t.

200S + 300M ≤ 1,500,000 Funds available

0.15*200S + 0.03*300M ≥ 200,000 Annual Income

M ≥ 500,000/300 Units in money market

S, M ≥ 0

The computer solution is shown below:

Cell Name Final Value Reduced Objective Allowable Allowable
Cost Coefficient Increase Decrease
$B$15 Units Invested S 4625 0 10 16.6666667 10
$C$15 Jars Produced F 1666.666667 0 6 1E + 30 3.75
Cell Name Final Value Shadow Constraint Allowable Allowable
Price R.H. Side Increase Decrease
$B$20 Whole tomatoes LHS 1425000 0 150000 1E + 30 75000
$B$21 Tomato Sauce LHS 200000 0.25 200000 15000 1942.857143
$B$22 Onion & Jalapeno LHS 1666.666667 3.75 1666.66667 294.117647 1666.666667

Suppose the risk index for the stock fund (the value of S) increases from its current value of 10 to 12. How does the optimal solution change, if at all?

  1. Suppose the risk index for the money market fund (the value of M) increases from its current value of 6 to 8. How does the optimal solution change, if at all?
  2. Suppose S increases to 12 and M increases to 8. How does the optimal solution change, if at all?

Expert Answer


Answer to Intel Investments, Inc. manages funds for a number of companies and wealthy clients. The investment strategy is tailored…..

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