PROBLEM 6 An investment firm has $1 million to invest in stocks, bonds, certificates of deposit, and real estate. The firm wishes to determine the mix of investments that will maximize the cash value at the end of 6 years. Opportunities to invest in stocks and bonds will be available at the beginning of each of the next 6 years. Each dollar invested in stocks will return $1.20 (a profit of $0.20) 2 years later; the return can be immediately reinvested in any alternative. Each dollar invested in bonds will return $1.40 3 years later; the return can be reinvested immediately. Opportunities to invest in certificates of deposit will be available only once, at the beginning of the second year. Each dollar invested in certificates will return $1.80 four years later. Opportunities to invest in real estate will be available at the beginning of the fifth and sixth years. Each dollar invested will return $1.10 one year later. To minimize risk, the firm has decided to diversify its investments. The total amount invested in stocks cannot exceed 30% of total investments, and at least 25% of total investments must be in certificates of deposit. The firm's management wishes to determine the optimal mix of investments in the various alternatives that will maximize the amount of cash at the end of the sixth year. Required: Solve this model by using the computer.

Operations Research : Applications and Algorithms

4th Edition

ISBN:9780534380588

Author:Wayne L. Winston

Publisher:Wayne L. Winston

Chapter3: Introduction To Linear Programming

Section: Chapter Questions

Problem 45RP

See similar textbooks

Related questions

Question

100%

PLEASE ANSWER THE REQUIRED (COMPLETE) THIS THRU EXCEL ONLY WITH STEP BY STEP SOLUTION AND FORMULAS. I WILL UPVOTE. SKIP THIS IF YOU ALREADY ANSWERED THIS.

PROBLEM 6
An investment firm has $1 million to invest in stocks, bonds, certificates of deposit, and real estate.
The firm wishes to determine the mix of investments that will maximize the cash value at the end of
6 years.
Opportunities to invest in stocks and bonds will be available at the beginning of each of the next 6
years. Each dollar invested in stocks will return $1.20 (a profit of $0.20) 2 years later; the return can
be immediately reinvested in any alternative. Each dollar invested in bonds will return $1.40 3 years
later; the return can be reinvested immediately.
Opportunities to invest in certificates of deposit will be available only once, at the beginning of the
second year. Each dollar invested in certificates will return $1.80 four years later. Opportunities to
invest in real estate will be available at the beginning of the fifth and sixth years. Each dollar invested
will return $1.10 one year later.
To minimize risk, the firm has decided to diversify its investments. The total amount invested in stocks
cannot exceed 30% of total investments, and at least 25% of total investments must be in certificates
of deposit.
The firm's management wishes to determine the optimal mix of investments in the various
alternatives that will maximize the amount of cash at the end of the sixth year.
Required:
Solve this model by using the computer.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, computer-science and related others by exploring similar questions and additional content below.