 Answering Questions Using Linear Programming Formulation

Subject Business Mathematical Finance

Question

Answer the following questions (using Linear programming formulation: Decision variable, Objective function and Constraints). Provide the solution in Microsoft Excel.

a. Calculate the optimum portfolio of investments to maximize profit obtained at maturity. Do not consider the option of selling securities before maturity.

b. Study the appropriateness of changing the diversification criteria, changing the criteria individually and supposing the rest to remain constant.

c. Recalculate (a) and (b) above if Luis can obtain a credit line for at most 1 million dollars at interest of 2% after tax.

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