Municipal bonds should constitute at least 20%

of the investment.

At least 40% of the funds should be placed in

a combination of electronic firms, aerospace

firms, and drug manufacturers.

No more than 50% of the amount invested in

municipal bonds should be placed in a high-risk,

high-yield nursing home stock.

Subject to these restraints, the client's goal is to max-

imize projected return on investments. The analysts

at Heinlein and Krampf, aware of these guidelines,

prepare a list of high-quality stocks and bonds and

their corresponding rates of return:

INVESTMENT

Los Angeles municipal bonds

Thompson Electronics, Inc.

United Aerospace Corp.

Palmer Drugs

Happy Days Nursing Homes

PROJECTED RATE

OF RETURN (%)

5.3

6.8

4.9

8.4

11.8

(a) Formulate this portfolio selection problem using

LP.

(b) Solve this problem./n8-2 (Investment decision problem) The Heinlein and

Krampf Brokerage firm has just been instructed by

one of its clients to invest $250,000 of her money

obtained recently through the sale of land holdings

in Ohio. The client has a good deal of trust in the

investment house, but she also has her own ideas

about the distribution of the funds being invested.

In particular, she requests that the firm select what-

ever stocks and bonds they believe are well rated but

within the following guidelines: