Investment Portfolio Optimization: Sensitivity Analysis
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Impact of Minimum CD & Treasury Bond Investment
Question: If the amount invested in CDs and treasury bonds is at least $5,000 plus 1.2 times the amount invested in municipal bonds and growth stocks, what is the new optimal solution and Optimal Feasible Value (OFV)?
Answer: Since the allowable increase is greater than $5,000 and this is a binding constraint, you must re-solve the problem to obtain the new optimal solution. The new OFV can be estimated using the shadow price: New OFV ≈ Old OFV + 5000 * (-0.0295).
Adding a GIC Investment Alternative
Question: If there is another investment alternative in Guaranteed Investment Certificates (GICs) with a Return on Investment (ROI) of 10%, what is the new optimal solution and OFV?
Answer: Introducing... Continue reading "Investment Portfolio Optimization: Sensitivity Analysis" »