30 The following questions pertain to the Finco investment example of Section 3.11. The LINDO output for this problem is shown in Figure 17.

a If Finco has $2,000 more on hand at time 0, by how much would their time 3 cash increase?

b Observe that if Finco were given a dollar at time 1, the cash available for investment at time 1 would now be 0.5A  1.2C  1.08S0  1. Use this fact and the shadow price of Constraint 2 to determine by how much Finco’s time 3 cash position would increase if an extra dollar were available at time 1.

c By how much would Finco’s time 3 cash on hand change if Finco were given an extra dollar at time 2?

d If investment D yielded $1.80 at time 3, would the current basis remain optimal?

e Suppose that a super money market fund yielded 25% for the period between time 0 and time 1. Should Finco invest in this fund at time 0?

f Show that if the investment limitations of $75,000 on investments A, B, C, and D were all eliminated, the current basis would remain optimal. (Knowledge of the 100% Rule is required for this part.) What would be the new optimal z-value?

g A new investment (investment F) is under consideration.

One dollar invested in investment F generates the following cash flows: time 0, $1.00; time 1,  $1.10;

time 2,  $0.20; time 3,  $0.10. Should Finco invest in investment F?