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An investment company currently has $10 million to invest. The goal is to maximize expected return earned over the next year. Their four investment possibilities are summarized below. In addition, the company has specified that at least 30% of the funds must be placed in common stock and treasury bonds, and no more than 40% in money market funds and municipal bonds. All of the $10 million currently on hand will be invested. Formulate an LP model that tells how much money to invest in each instrument and solve it.
Investment Possibility
Treasury Bonds – Expected Return % – 8, Maximum Allowable Investment -5 million
Common Stock – Expected Return % – 6, Maximum Allowable Investment -7 million
Money Market- Expected Return % – 12, Maximum Allowable Investment -2 million
Municipal Bonds – Expected Return % – 9, Maximum Allowable Investment -4 million
Expert Answer
The answer is in yellow cell. It is in USD. if you wnat to convert it in millions it is 5, 1, 2 and 2 million.
