Managerial Economics Assignment
Instructions:
This assignment is worth 5% of your final grade and you are required to show all workings in order to receive full marks. The assignment is be submitted to the Mona School of Business and Management (south) on Tuesday, April 02 2012 before the office close.
Persons will be penalized for late assignments. Each day your assignment is late it will be marked out of half of the grade [ie. if the assignment is one day late it is marked out of 3%, two days late – 1.5% and so on (Saturday and Sunday are also counted as days late)]
Question 1
The Blue Bell Corporation has $20 million to invest in a diversified portfolio. The investments and their associated interest rate and risk scores are given in the table below.
Investments
Rate of Return
Risk Score
Trade credits
9%
1.7
Corporate bonds
12%
1.2
Gold Stocks
16%
3.7
Platinum stocks
10%
2.4
Mortgage securities
6%
2.0
Construction loans
16%
2.9
The Blue Bell Corporation cannot invest more than 20% into anyone investments, at least 3 0% must be invested into precious metals and at least 45% must be invested into trade credits and corporate bonds. In addition, The Blue Bell Corporation has to limit its overall risk to no more than 2.0.
Formulate the above problem as a linear programming model.
Question 2
Branded Products, Inc., based in Halfway Tree is a leading producer and marketer of household laundry detergent and bleach products. About a year ago, Branded products rolled out its new Super Detergent in four western parishes, following success in more limited test markets. At the time of introduction, management wondered whether the company could successfully crack this market, dominated by Breeze and other major players. The following regression model forecast results for Super Detergent over the past seven months (30 weeks). The t-statistics are in parenthesis.
Q = 867.98 – 81.86P + 0.007A + 0.006I + 82.86Px + 1.309T
(345) (24)…