Chapter 3, Problem 5RP

Explanation of Solution

LP to maximize cash on hand at time “3”:

• Assume the following,
  • Let “a” be the dollars invested in investment “A”.
  • Let “b” be the dollars invested in investment “B”.
  • Let “c” be the dollars invested in investment “C”.
  • Let “${\text{t}}_{\text{y}}$” be the dollars invested in T-bills at the end of year “y”.
• The objective function to maximize Finco’s cash on hand at time “3” is as follows,

$\text{Max z=1}\text{.2c+1}{\text{.1t}}_2$

• The above function subject to the following constraints,
  • “${\text{a+t}}_0=100$” denotes the cash in hand available at time “0”