Max s.t.
3U + 5H Maximize total annual return
25U + 50H
0.50U + 0.25D
1U
U H > 0 ( bigger or equal to)
The computer solution of this problem is shown in Figure 3.14. (PICTURE)
a. What is the optimal solution and what is the value of the total annual return?
b. Which constraints are binding? What is your interpretation of these constraints in
terms of the problem?
c. What are the dual values for the constraints? Interpret each.
d. Would it be beneficial to increase the maximum amount invested in U.S. Oil? Why or
why not?
8. Refer to Figure 3.14( THE PICTURE) which shows the computer solution of Problem 7.
a. How much would the return for U.S. Oil have to increase before it would be beneficial
to increase the investment in this stock?
b. How much would the return for Huber Steel have to decrease before it would be beneficial to reduce the investment in this stock?
c. How much would the total annual return be reduced if the U.S. Oil maximum were
reduced to 900 shares?
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