A trust officer at Pond Island Bank needs to determine what percentage of the banks investible funds
Question:
A trust officer at Pond Island Bank needs to determine what percentage of the bank’s investible funds to place in each of the following investments.
The column labeled Yield represents each investment’s annual yield. The column labeled Maturity indicates the number of years funds must be placed in each investment. The column labeled Risk indicates an independent financial analyst’s assessment of each investment’s risk. In general, the trust officer wants to maximize the weighted average yield on the funds placed in these investments while minimizing the weighted average maturity and the weighted average risk.
a. Formulate an MOLP model for this problem and implement your model in a spreadsheet.
b. Determine the best possible value for each objective in the problem.
c. Determine the solution that minimizes the maximum percentage deviation from the optimal objective function values. What solution do you obtain?
d. Suppose management considers minimizing the average maturity to be twice as important as minimizing average risk, and maximizing average yield to be twice as important as minimizing average maturity. What solution does this suggest?
Step by Step Answer:
Spreadsheet Modeling And Decision Analysis A Practical Introduction To Business Analytics
ISBN: 1233
8th Edition
Authors: Cliff T. Ragsdale