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
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