How much money should be invested in each bond

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Reference no: EM1388227

A trust officer at the Blacksburg National Bank needs to determine how to invest $100,000 in the following collection of bonds to maximize the annual return.

Bond

Return

Maturity

Risk

Tax-Free

9.5%

Long

High

Yes

8.0%

Short

Low

Yes

9.0%

Long

Low

9.0%

Long

High

Yes

9.0%

Short

High

The officer wants to invest at least 50% of the money in short-term issues and no more than 50% in high-risk issues. At least 30% of the funds should go in tax-free investments, and at least 40% of the total annual return should be tax free.

Formulate an LP model for this problem in a spreadsheet and solve with Solver.

How much money should be invested in each Bond?

Reference no: EM1388227

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