The MacKensie’s daughter will begin college 4 years from today. Her parents want to invest $10,000 at the beginning of each of the 4 years to accumulate a fund that can help pay the cost. Each year they expect to have available both certificates of deposit returning 5% after 1 year and ones returning 12% after 2 years. This year, they also have an opportunity to make a special investment that would return 21% after 4 years.

The MacKensies want to choose investments to maximize their college fund assuming that all funds are reinvested at maturity.

(a) Formulate a time-phased LP to choose an optimal investment plan.

(b) Which of the constraints in your model are balance constraints? Explain.

(c) What is the time horizon of your model?

Explain.

(d) Enter and solve your model with the class optimization software.