Wm Allen Smith
asked on
Using Excel Solver for Linear Programming
Hi I am having some issues with a linear programming problem I trying to resolve regarding investment returns. I have a maximum of $800K to invest in a growth fund, Income fund and a money market fund and I trying to determine how much should be invested in each fund.
The Contraints:
Growth >=20% or <=40% of total investment
Income >=20% or <= 50% in income
Money Market >= 30% .
The overall risk limit is .05, growth risk is .10, income risk is .07, money market risk is .01.
The yields are Growth: .18; Income: .125; money market: .075. I worked out the following equation:
Max = .18Growth + .125Income +.075Money Market
S.T.
Growth+Income+Money Market <=$800000
Risk (as a weighted average) .10Growth+ .07Income+ .01Money/Gowth + Income + Money <=.05
Growth <= .40
Income<= .50
Money Market >=.30
Growth, Income,>=0
When I ran it in Solver , I got the results below:
GROWTH INCOME MMF
Objective Function 0.180 0.125 0.075 TOTAL
Constraints LHS Equality Direction RHS
Growth>20% 0.20 0 >= 800000
Growth<40% 0.40 0 <= 800000
Income>20% 0.20 106666.6667 >= 800000
Income<50% 0.5 266666.6667 <= 800000
Money>30% 0.3 80000 >= 800000
RISK 0.1 0.07 0.01 40000 <= 40000
INVESTMENT 1 1 1 800000 <= 800000
GROWTH INCOME MMF
DV 0 533333.3333 266666.6667 86666.66667
This results generates a solution which solve finds unfeasible. I want to verify that is the case and there is no error in my execution of the problem.
I have attached the excel file as well as the problem text. Please advise.
Thank You!
CASE-TEST-INVESTMENTS.xlsx
investmentstrategyproblemasw.pdf
The Contraints:
Growth >=20% or <=40% of total investment
Income >=20% or <= 50% in income
Money Market >= 30% .
The overall risk limit is .05, growth risk is .10, income risk is .07, money market risk is .01.
The yields are Growth: .18; Income: .125; money market: .075. I worked out the following equation:
Max = .18Growth + .125Income +.075Money Market
S.T.
Growth+Income+Money Market <=$800000
Risk (as a weighted average) .10Growth+ .07Income+ .01Money/Gowth + Income + Money <=.05
Growth <= .40
Income<= .50
Money Market >=.30
Growth, Income,>=0
When I ran it in Solver , I got the results below:
GROWTH INCOME MMF
Objective Function 0.180 0.125 0.075 TOTAL
Constraints LHS Equality Direction RHS
Growth>20% 0.20 0 >= 800000
Growth<40% 0.40 0 <= 800000
Income>20% 0.20 106666.6667 >= 800000
Income<50% 0.5 266666.6667 <= 800000
Money>30% 0.3 80000 >= 800000
RISK 0.1 0.07 0.01 40000 <= 40000
INVESTMENT 1 1 1 800000 <= 800000
GROWTH INCOME MMF
DV 0 533333.3333 266666.6667 86666.66667
This results generates a solution which solve finds unfeasible. I want to verify that is the case and there is no error in my execution of the problem.
I have attached the excel file as well as the problem text. Please advise.
Thank You!
CASE-TEST-INVESTMENTS.xlsx
investmentstrategyproblemasw.pdf
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Accepted answer: 500 points for hgholt's comment #a41367284
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