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23. A trust officer at the Blacksburg National Bank needs to determine how to invest $100,000 in the following collection of bonds to maximize the annual return. Bond Annual Maturity Risk Tax-Free Return 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. a. Formulate an LP model for this problem. b. Create a spreadsheet model for this problem and solve it using Solver. c. What is the optimal solution?

23. A trust officer at the Blacksburg National Bank needs to determine how to invest $100,000 in the following collection of bonds to maximize the annual return. Bond Annual Maturity Risk Tax-Free Return 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. a. Formulate an LP model for this problem. b. Create a spreadsheet model for this problem and solve it using Solver. c. What is the optimal solution?

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter19: The Basic Tools Of Finance
Section: Chapter Questions
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23. A trust officer at the Blacksburg National Bank needs to determine how to invest $100,000 in the following collection of bonds to maximize the annual return. Bond Annual Maturity Risk Tax-Free Return 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. a. Formulate an LP model for this problem. b. Create a spreadsheet model for this problem and solve it using Solver. c. What is the optimal solution?
Transcribed Image Text:23. A trust officer at the Blacksburg National Bank needs to determine how to invest $100,000 in the following collection of bonds to maximize the annual return. Bond Annual Maturity Risk Tax-Free Return 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. a. Formulate an LP model for this problem. b. Create a spreadsheet model for this problem and solve it using Solver. c. What is the optimal solution?
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