Management Homework Help
Hide Assignment InformationInstructions An investor has $70,000 to divide among several instruments. Municipal bonds have an 8.5% return, C D’s a 5% return, t-bills a 6.5% return, and growth stock 13%
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An investor has $70,000 to divide among several instruments. Municipal bonds have an 8.5% return, C D’s a 5% return, t-bills a 6.5% return, and growth stock 13%.
The following guidelines have been established:
- No more than 20% in municipal bonds
- Investment in growth stock fund should be greater than other three alternatives.
- At least 10% invested in treasury bills and municipal bonds
- Less should be invested in treasury bills and growth stocks than in CDs and municipal bonds by a ratio of 1.2 to 1.
- All $70,000 should be invested.
Formulate a model and solve it using computer. How should the $70,000 be allocated to each alternative to maximize annual return? What is the annual return?
Notes:
- Attach a Linear Programming computer file of the solution (QM for Windows – save it as a “.lin” file). Mac computer file is not accepted.
- Attach a Word file to answer the questions: How should the $70,000 be allocated to each alternative to maximize annual return? What is the annual return?
- Watch chapter 4 video clips
- Refer to “Investment Example” video for the model formulation
- Refer to “Product Mix Example Using QM for Windows” video clip for the computer solution
