Assume that x2, x7 and x8 are the dollars invested in three different common stocks from New York Stock Exchange. In order to diversify the investments, the investing company requires that no more than 60% of the dollars invested can be in "stock 2". The constraint for this requirement can be written as:
A) x2 ≥ .60
B) x2 ≥ .60 (x2 + x7 + x8)
C) .4x2 - .6x7 - .6x8 ≤ 0
D) .4x2 - .6x7 - .6x8 ≥ 0

Question

Quizplus · Accepted Answer

The constraint for the diversification requirement is that no more than 60% of the dollars invested can be in "stock 2". This can be translated as 0.4x2 - 0.6x7 - 0.6x8 ≤ 0, where x2 is multiplied by 0.4 to represent the maximum 60% allowed in stock 2 and x7 and x8 are multiplied by -0.6 to represent the minimum of 40% that must be invested in other stocks. Therefore, the correct answer is C.

Assume That X2, X7 and X8 Are the Dollars Invested