A. Help Susan develop a model for the year that will meet her irregular monthly financial obligations while achieving her investment objectives and solve the model. B. If Susan decides she doesn’t want to include all her original $3,800 in her budget at the beginning of the year, but instead she wants to invest some of it directly in alternative longer-term investments, how much does she need to develop a feasible budget? II. Susan Wong's Personal Budgeting ModelAfter Susan Wong graduated from State University with a degree in management science, she went to workfor a computer systems development firm in the Washington, DC, area. As a student at State, Susan paid her normalmonthly living expenses for apartment_rent, food, and entertainment out of a bank account set up by her parents.Each month they would deposit a specific amount of cash into Susan's account. Her parents also paid her gas,telephone, and bank credit card bills, which were sent directly to them. Susan never had to worry about things likehealth, car, homeowners', and life insurance; utilities; driver's and car licenses; magazine subscriptions; and soon. Thus, while she was used to spending within a specific monthly budget in college, she was unprepared for theirregular monthly liabilities she encountered once she got a job and was on her own.In some months Susan's bills would be modest and she would spend accordingly, only to be confronted thenext month with a large insurance premium, or a bill for property taxes on her condominium, or a large credit cardbill, or a bill for a magazine subscription, and so on thenext month. Such unexpected expenditures would result in months when she could not balance her checkingaccount; she would have to pay her bills with her bank credit card and then pay off her accumulated debt ininstallments while incurring high interest charges. By theend of her first year out of school, she had hoped to have some money saved to begin an investment program, butinstead she found herself in debt.Frustrated by her predicament, Susan decided to get her financial situation in order. First, she sold thecondominium that her parents had helped her purchase and moved into a cheaper apartment. This gave her enoughcash to clear her outstanding debts, with_$3,800 left over to start the newyear with. Susan then decided to use some of the management science she had learned in collegeto help develop a budget. Specifically, she decided to develop a linear programming model to help her decide howmuch she should put aside each month in short-term investments to meet the demands of irregular monthlyliabilities and save some money. First, Susan went through all her financial records for the year and computed herexpected monthly liabilities for the coming year, as shown in the following table:MonthBillsMonthBillsJanuaryFebruaryMarch$2,750July$3,0502,8602.300AugustSeptember2.3351,9752.1201,670AprilMayOctober1,205November2,710June1,600December2,980 Susan's after-taxes-and-benefits salary is $29,400 per year, which she receives in 12 equalmonthly paychecks that are deposited directly into her bank account.Susan has decided that she will invest any money she doesn't use to meet her liabilities each month ineither 1-month, 3- month, or 7-month short-term investment vehicles rather than just leaving the money in aninterest-bearing checking account. The yield_on 1-month investments is 6% per year nominal; on 3-monthinvestments, the yield is 8% per year nominal; and on a 7-month investment, the yield is 12% per year nominal. Aspart of her investment strategy, any time one of the short-term investments comes due, she uses the principal aspart of her budget, but she transfers any interest earned to another long-term investment (which she doesn'tconsider in her budgeting process). For example, if she has $100 left over in January that she invests for 3 months, inApril, when the investment matures, she uses the $100 she originally invested in her budget, but any interest on the$100 is invested elsewhere. (Thus, the interest is not compounded over the course of the year.)Susan wants to develop a linear programming model to maximize her investment return during the year soshe can take that money and reinvest it at the end of the year in a longer-term investment program. However, shedoesn't have to confine herself to short term investments that will all mature by the end of the year; she cancontinue to put money toward the end of the year in investments that won't mature until the following year. Herbudgeting process will continue to the next year, so she can take out any surplus left over after December andreinvest it in a long-term program if she wants to.A. Help Susan develop a model for the year that will meet her irregular monthly financial obligations whileachieving her investment objectives and solve the model.B. If Susan decides she doesn't want to include all her original $3,800 in her budget at the beginning of theyear, but instead she wants to invest some of it directly in alternative longer-term investments, howmuch does she need to develop a feasible budget?

) LP model to maximize Susan's investment return while meeting her monthly liabilities is as follows…

Answered: hieving her investment objectives and…

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 2EA: Consider the national nonprofit organization the American Red Cross. Assume you are the regional...