Answered: A trust officer at the Blacksburg…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Question

A trust officer at the Blacksburg National Bank needs to determine how to invest $150,000 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 40% of the money in short-term issues and no more than 20% in high-risk issues. At least 25% of the funds should go in tax-free investments, and at least 45% of the total annual return should be tax free.

Formulate the LP model for this problem.
Create the spreadsheet model and use Solver to solve the problem.

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