7. Mr. Murty, a retired govt. officer, has recently received his retirement benefits, viz. provident fund, gratuity etc. He is contemplating as to how much funds heshould invest in various alternatives open to him so as to maximise returns on investment. The investment alternatives are: government securities, fixed deposits of apublic limited company, equity shares, time deposits in banks, national savings certificates and real estate. He has made a subjective estimate of the risk involved. Thedata on the return of investment, the number of years for which the funds will be blocked to earn this return on investment and the subjective risk involved are asfollows: Investment Alternatives Return No. of Years Risk Government securities 6% 15 1 Company Deposits 15% 33 Equity shares 20% 67 Time deposits 10% 31N.S.C. 12% 61 Real estate 25% 10 2 He was wondering what percentage of funds he should invest in each alternative so as to maximize the return on investment.He decided that average risk should not be more than 4, and funds should not be locked up for more than 15 years. Formulate the LPP and solve, if he does not wantmore than 30% of the investment to be put in the real estate.

Solution is the given below Explanation:We first specify the decision variables and constraints,…

Answered: 7. Mr. Murty, a retired govt. officer,…

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter17: Retirement And Estate Planning

Section: Chapter Questions

Problem 1LTAI

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