Write an ip to determine your optimal borrowing strategy

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Reference no: EM131866604

Model the following problem.

You are trying to minimize the amount that you are in debt from your living expenses while in college. You estimate that your expenses each month is $900.

You have a bank that you work with and they will always give you a loan at the start of any month. The loan can be for any value up to $4,000.

The loan costs an additional $100 for the paperwork to process the loan. Thus, you only get to use $3, 900 from a $4,000 loan or 800 from a $1, 900 loan.

You can assume that all of your budget money is spent at the beginning of the month (moved into a non interest bearing checking account).

Any money that is left in the savings account over a month earns 1% interest. Any dollar borrowed costs 1% each month.

Write an IP to determine your optimal borrowing strategy to survive this year.

Reference no: EM131866604

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