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Assignment 4

This document discusses solving optimization problems with multiple constraints. It presents an example problem with four bonds (X1, X2, X3, X4) where the objective is to maximize total profits subject to budget and risk constraints. The solution involves setting up the optimization problem and solving using the corner point method, which identifies four corner points with the maximum profit occurring at X1=0, X2=7/2, X3=0, X4=0 for a maximum profit of 10. The document then discusses determining the minimum distances between points A, B, C, and W by considering the eight possible constraints from the absolute value terms.

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bboyson921
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31 views

Assignment 4

This document discusses solving optimization problems with multiple constraints. It presents an example problem with four bonds (X1, X2, X3, X4) where the objective is to maximize total profits subject to budget and risk constraints. The solution involves setting up the optimization problem and solving using the corner point method, which identifies four corner points with the maximum profit occurring at X1=0, X2=7/2, X3=0, X4=0 for a maximum profit of 10. The document then discusses determining the minimum distances between points A, B, C, and W by considering the eight possible constraints from the absolute value terms.

Uploaded by

bboyson921
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Jackson LEI Hou Ieong

S075382

HE4
Assignment 4

1. Let Bond1 be X1, Bond2 be X2, Bond3 be X3, Bond4 be X4

Maximum profits: X1 x 1.13 + X2 x 1.08 + X3 x 1.12 + X4 x 1.14

Constraints:
X1+X2+X3+X4 = 1 000 000
X1, X2, X3, X4 => 0
(X1 x 3 + X2 x 4+ X3 x 7 + X4 x 9)/ 1 000 000 <= 6
X1, X2, X3, X4 <= 400 000
X1 x 0.06 + X2 x 0.08 + X3 x 0.1 + X4 x 0.09 => 1 000 000 x 0.08

2. For this equation, we need to solve the Z first as it is an iso-profit line or corner
point method.

1) x + y + z = 3
z = 3 - x - y ---- (2)
Put (2) in the equation of max profit:
3x + 2y + 3 - x - y
= 2x + y + 3 ---- new max. profit

Now, we only get the two unknowns for the questions

Solving the max profit by potting the graphic and use the Corner Point Solution Method:

From the equation: x + 2y <=4

When x = 0, y = 2;
y = 0, x = 4

From the equation: 2x + 3y <=7

When x = 0, y = 7/3;
y = 0, x = 7/2
Then, we can draw two lines on the graphic and get 4 corner points.
Jackson LEI Hou Ieong

S075382

HE4

Point 1: x = 0, y = 2; Max profit = 2 x 0 + 2 + 3=5


Point 2: x = 2, y = 1; Max profit = 2 x 2 + 1 + 3=8
Point 3: x = 7/2, y = 0; Max profit = 2 x 7/2 + 0 + 3= 10
Point 4: x = 0, y = 0; Max profit = 2 x 0 + 0 + 3=3

The max profit is on point 3 (7/2, 0) and the max profit is 10

3. The distances will be |W-B|+|W-A|+|W-C|


But, it cannot be showed in absolute value, so it can be divided into two possible factors
for each.

|W-B|= W-B, when W => B =>0 or B - W, when B => W


|W-A|= W-A, when W => A =>0 or A - W, when A => W
|W-C|= W-C, when W => C =>0 or C - W, when C => W

From these factors, then we can get 8 possible constraints

1. 3W - A - B – C >= 0
2. -3W + A + B + C >= 0
3. W - A + B + C >= 0
4. – W + A + B + C >= 0
5. W + A - B - C >= 0
6. – W - A + B + C >= 0
7. – W + A + B + C >= 0
8. W - A - B - C >= 0

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