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A Stockbroker has provided several investment options to her client as shown in the following table. Investment Andover municipal bonds (Bonds) Cost (thousands) Expected
A Stockbroker has provided several investment options to her client as shown in the following table. Investment Andover municipal bonds (Bonds) Cost (thousands) Expected Return (thousands) $400 $35 Hamilton city bonds (Bonds) $1,000 $100 East Power & Light Co. (Utility) $350 $30 Nebraska Electric Service (Utility) $700 $65 Southern Gas and Electric (Utility) $490 $45 Manuel Products Co. (Regular) $270 $20 Builders Paint Co. (Regular) $800 $90 Rest Easy Hotels Co. (Regular) $500 $50 To earn the expected return, full amount should be invested. No partial investments are allowed. For example, to earn $35,000 return, $400,000 should be invested in Andover municipal bonds. The client agrees to this list but provides several conditions: (1) No more than $3,000,000 can be invested, (2) the money is to be spread among at least five investments, (3) no more than one type of bond can be purchased, (4) at least two utility stocks must be purchased, and (5) at least two regular stocks must be purchased. Formulate this as a 0-1 IP problem to maximize expected return and solve it. a. What investments should be selected? b. What is the expected return? c. What is the total amount invested? d. If the investment limit increased to $3,500,000, how would the solution change? Final answer must be typed in the Exam Quiz. Show all work including the definition of decision variables, objective function, and constraints to earn full credit. If Excel Solver is used, show screen captures of Solver paramters. If LPSolve is used, show the screen captures of the model and the solution.
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