Fred Wheeler has come to you with a possible investment of $400,000 cash. Because you are a successful investment counselor, you have solicited the following information from Fred to guide you in recommending your investment strategy.
Fred is relatively cautious and desires an average liquidity factor of at least 65 and an average risk of no more than 40. At most, $60,000 is to be invested in Z Corporation stocks or bonds. No more than 40% of the portfolio is to be invested in any one category. With the exception of the Money Market Fund, no more than 20% of the portfolio can be in any one investment.
At least $1,000 must be put in the Money Market Fund; at most $15,000 is to be placed in the All Saver’s Certificates. The total investment in debt is to be no more than $90,000, and at least $10,000 must be invested in a T-Bill Account.
Recommend an investment portfolio for Fred Wheeler. Analyze the limitations of the constraints. Among other analyses, determine the expected return of additional dollar investments. Which of his constraints are limiting, which are the most limiting, and what, if any, recommendations would you make to Fred concerning his constraints?