A trust officer

A trust officer at Wildcat Bank needs to determine how to invest $360,000 in the following collection of bonds to maximize the annual return.

 

BOND      ANNUAL  RETURN      MATURITY       RISK       TAX FREE

A                 11%                          LONG             HIGH         YES

B                 9%                          SHORT           LOW          YES

C              9.5%                       LONG               LOW            NO

D              12%                        SHORT             HIGH          YES

E              9%                       SHORT             HIGH              NO

 

 

The officer wants to invest at least 55% of the money in short-term issues and no more than 60% in high-risk issues.

Also, due to the local high tax rates, at least 30% of the investment money should at least be $7,500 while the return collected from high-risk options cannot be more than $6,600.

 

a) formulate and list the linear programming model for this problem.

b) use the software “LINGO” to slove the above model and report the optimal solution.

c) What is the highest annual return from the above optimal solutions?

d) which constrains are binding? why