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As part of the settlement for a class action lawsuit, Hyatt-Harber-Price must make cash payments totaling $1.7 million over the next six years, according
As part of the settlement for a class action lawsuit, Hyatt-Harber-Price must make cash payments totaling $1.7 million over the next six years, according to the following schedule. Year 1 2 3 4 5 6 Payments ($) | 125,000 146,000 167,000 194,000 219,000 249,000 The annual payments must be made at the beginning of each year. The judge in the suit will approve an amount that, along with earnings on investment, will cover the annual payments. The investment options are limited to the following. Federal government bonds, with a face value of $1,000 per unit, that may be purchased at the beginning of the plan. The market price is $1,070 per unit, with an annual coupon rate of 4.8%. The bonds mature at the beginning of year 5. Municipal government bonds that may be purchased at the beginning of each year. These bonds mature in two years and provide a rate of return of 5.7%. A savings account that earns 3.1% annual interest. Additionally, the judge has ordered that no more than $100,000 may be held in municipal government bonds at any given time. Once the investment plan is submitted to and approved by the judge, Hyatt-Harber-Price will pay a trustee the amount that will be required to fund the plan. Develop the linear programming model needed to minimize the total up-front investment that Hyatt-Harber-Price will need to make while still ensuring that the provisions of the court-ordered payment schedule are met. You do not need to solve the LP.
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