Investment Company has collected a total of $3,000,000 from students, staff, and faculty to invest in 10 mutual fund alternatives with the following diversification and operational restrictions:

No more than %15 of the total amount should be invested in any one fund.
If a fund is chosen for investment, then at least $150,000 should be invested in it.
At least one fund should be chosen from each fund type.
No more than two from Growth & Income funds.
Investment in fund 5 is conditional on investing in fund 10 (you can invest in fund 5 only if fund 10 is chosen for investment).
The total amount invested in pure bond funds must be at least 50% of the amount invested in Growth funds.

Using the following expected returns, formulate and solve a model that will determine the investment strategy that will maximize the expected annual return. What assumptions have you made in your model? How often would you expect to run your model?

Fund Fund Type Expected Return (%)
1 Growth 6.42
2 Growth 7.25
3 Growth 6.82
4 Growth & Income 7.00
5 Growth & Income 7.84
6 Growth & Income 7.23
7 Stock & Bond 6.35
8 Stock & Bond 5.95
9 Bond 5.20
10 Bond 5.40