(Solved by Humans)-A trust officer at the BN bank needs to determine how to invest

Discipline:

Type of Paper:

Academic Level: Undergrad. (yrs 3-4)

Paper Format: APA

Pages: 5 Words: 1375

Question

A trust officer at the BN bank needs to determine how to invest $100,000 in the following collection of bonds to maximize the annual return.

Bond

Annual Return

Maturity

Risk

Tax-Free

A

9.5%

Long

High

Yes

B

8.0%

Short

Low

Yes

C

9.0%

Long

Low

No

D

9.0%

Long

High

Yes

E

9.0%

Short

High

No

The officer wants to invest at least 50% of the money in short-term issues and no more than 50% in high-risk issues. At least 30% of the funds should go in tax-free investments, and at least 40% of the total annual return should be tax free.

  • Formulate an LP model for this problem. (10 pts)

  • Create a spreadsheet model for this problem and solve it using Solver.? (10 pts)

  • What the optimal solution?(10 pts)


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