In a portfolio problem, X1, X2, and X3 represent the number of shares purchased of stocks 1, 2, and 3, which have selling prices of $15, $47.25, and $110, respectively. The investor has up to $50,000 to invest.
-An appropriate part of the model would be:
A) 15X1 + 47.25X2 +110 X3 ≤ 50,000
B) MAX 15X1 + 47.25X2 + 110X3
C) X1 + X2 +X3 ≤ 50,000
D) MAX 50(15)X1 + 50 (47.25)X2 + 50 (110)X3

Question

Quizplus · Accepted Answer

The appropriate part of the portfolio model would be to set a constraint on the total amount of money spent on purchasing the shares, which is represented by the left-hand side of option A. Option B is not appropriate as it is a part of the objective function that needs to be maximized. Option C does not relate to the amounts invested in each stock but instead sets a limit on the total number of investments. Option D is not appropriate as it multiplies the left-hand side of option A with a fixed value of 50, which is not an accurate representation of the portfolio constraints.

In a Portfolio Problem, X1, X2, and X3 Represent the Number