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3 . Broker Mario Dragon is looking to make money in the bond market. Four types of bonds are available for purchase and sale, and
Broker Mario Dragon is looking to make money in the bond market. Four types of bonds are available for purchase and sale, and the bid and ask price of each bond are as shown:
Bid Price Ask Price
Bond $ $
Bond $ $
Bond $ $
Bond $ $
Bonds can only be bought and sold now. Mario can buy at most units of each bond at the ask price or sell at most units of each bond at the bid price. For each bond, the person who sells the bond will pay the person who buys the bond cash payments over the next years as follows:
Year Bond Bond Bond Bond
$ $ $ $
$ $ $ $
$ $ $ $
Marios goal is to maximize his immediate revenue from selling bonds minus his immediate costs for buying bonds. He will use this profit to build a new library on Drexels campus, so he will not use it to meet any of his cash obligations in Years Over the next three years, after each years payments are made and received, his cash position should be nonnegative. He is allowed to rollover any excess funds.
Help Sheldon maximize his net profit from buying and selling bonds.
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