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
A
9.5%
Long
High
Yes
B
8.0%
Short
Low
Yes
C
9.0%
Long
Low
No
D
9.0%
Long
High
Yes
E
9.0%
Short
High
No
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?