A trust officer at the Blacksburg National Bank needs to determine how to invest $150,000 in...

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

PLEASE SHOW STEP BY STEP spreadsheet models and solver.

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.

Expert Solution

The LP spreadsheet model is built as below :

This is solved using Solver as below :

The solver solution is below :

This solution maximizes annual return subject to the given constraints

jeff jeffy answered 2 years ago

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