Microsoft Office

Part V
Analyzing Data with Excel
FIGURE 37.14
Solver determined how to use the resources to maximize the total profit.
Optimizing an investment portfolio
This example demonstrates how to use Solver to help maximize the return on an investment portfolio. A
portfolio consist of several investments, each of which has a different yield. In addition, you may have some
constraints that involve reducing risk and diversification goals. Without such constraints, a portfolio problem
becomes a no-brainer: Put all of your money in the investment with the highest yield.
This example involves a credit union, a financial institution that takes members’ deposits and invests them
in loans to other members, bank CDs, and other types of investments. The credit union distributes part of
the return on these investments to the members in the form of dividends, or interest on their deposits.
This hypothetical credit union must adhere to some regulations regarding its investments, and the board of
directors has imposed some other restrictions. These regulations and restrictions comprise the problem’s
constraints. Figure 37.15 shows a workbook set up for this problem.
ON the CD-ROM
This workbook is available on the companion CD-ROM. The file is named investment
portfolio.xlsx.
The following constraints are the ones to which you must adhere in allocating the $5 million portfolio:
n
n
The amount that the credit union invests in new-car loans must be at least three times the amount
that the credit union invests in used-car loans. (Used-car loans are riskier investments.) This constraint
is represented as:
C5>=C6*3
Car loans should make up at least 15 percent of the portfolio. This constraint is represented as:
D14>=.15
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