Stat week 6

6-1

Action Items

1. Read the Political Candidate Case.

2. Answer the following items about the case:

1. What is the Jim trying to optimize? Is he trying to maximize or minimize?

2. Write the objective function to support this analysis.

3. What inputs do you need to support your analysis?

4. Is there any extraneous data you have been given that you will not need?

5. What criteria has Jim given you to support the analysis?

3. Create a spreadsheet model that supports your analysis.

6-2

Action Items

1. Review the "Mexicana Wire Works" case study at the end of Chapter 7 in Quantitative Analysis.

2. Guidance:

1. Identify the one key item you are attempting to optimize (this becomes your SET TARGET CELL location in Solver).

2. Identify the ten constraints associated with the problem.

3. Note that case facts like "defective product is stored separately until it can be reworked" is not pertinent, whereas the April Orders chart is pertinent.

3. Complete the spreadsheet model and respond to the questions at the end of the case study.

6-3

Action Items

1. Review problem 7-37 in Chapter 7 of Quantitative Analysis.

37) Bhavika Investments, a group of financial advisors

and retirement planners, has been requested to provide

advice on how to invest $200,000 for one of its

clients. The client has stipulated that the money

must be put into either a stock fund or a money market

fund, and the annual return should be at least

$14,000. Other conditions related to risk have also

been specified, and the following linear program

was developed to help with this investment decision:

total investment is

$200,000

return must be at least

$14,000

at least $40,000 must

be in money market

fund

where

invested in stock fund

M = dollars invested in money market fund

S = dollars

S,M Ú 0

M Ú 40,000

0.10S + 0.05M Ú 14,000

S + M = 200,000

subject to

Minimize risk = 12S + 5M

The QM for Windows output is shown below.

(a) How much money should be invested in the

money market fund and the stock fund? What is

the total risk?

(b) What is the total return? What rate of return is

this?

(c) Would the solution change if risk measure for

each dollar in the stock fund were 14 instead

of 12?

(d) For each additional dollar that is available, how

much does the risk change?

(e) Would the solution change if the amount that

must be invested in the money market fund were

changed from $40,000 to $50,000?

2. Complete all the parts of the problem.

3. No Excel model is required; however, write your responses in a Word document.