Financial Applications 1 Excel Solver Project The Plus500 Brokerage firm has just been instructed by one of its clients to invest R250 000 of her money obtained recently through the sale of land holdings in Ohio. The client has a good deal of trust in the investment house, but she also has her own ideas about the distribution of the funds being invested. In particular, she requests that the firm select whatever stocks and bonds they believe are well rated, but within the following guidelines: (1) Municipal bonds should constitute at least 20% of the investment. (2) At least 40% of the funds should be placed in a combination of electronic firms, aerospace firms, and drug manufacturers. (3) No more than 50% of the amount invested in municipal bonds should be placed in a high-risk, high-yield nursing home stock. Subject to these restraints, the client's goal is to maximize projected return on investments. The analysts at Plus500, aware of these guidelines, prepare a list of high-quality stocks and bonds and their corresponding rates of return: INVESTMENT PROJECTED RATE OF RETURN (%) Los Angeles municipal bonds 5.3 Thompson Electronics, Inc. 6.8 United Aerospace Corp. 4.9 Palmer Drugs 8.4 Happy Days Nursing Homes 11.8 (a) Formulate (that is, setting up the objective function and constraints) Plus500 problem using LP. (18.5) (b) Use your formulation in part (a) to form a Microsoft Excel Solver spreadsheet to solve the LP problem. (46) (c) State the optimal solution and the value of the objective function. (5

Financial Applications 1 Excel Solver Project The Plus500 Brokerage firm has just been instructed by one of its clients to invest R250 000 of her money obtained recently through the sale of land holdings in Ohio. The client has a good deal of trust in the investment house, but she also has her own ideas about the distribution of the funds being invested. In particular, she requests that the firm select whatever stocks and bonds they believe are well rated, but within the following guidelines: (1) Municipal bonds should constitute at least 20% of the investment. (2) At least 40% of the funds should be placed in a combination of electronic firms, aerospace firms, and drug manufacturers. (3) No more than 50% of the amount invested in municipal bonds should be placed in a high-risk, high-yield nursing home stock. Subject to these restraints, the client's goal is to maximize projected return on investments. The analysts at Plus500, aware of these guidelines, prepare a list of high-quality stocks and bonds and their corresponding rates of return: INVESTMENT PROJECTED RATE OF RETURN (%) 5.3 6.8 Los Angeles municipal bonds Thompson Electronics, Inc. United Aerospace Corp. Palmer Drugs 4.9 8.4 Happy Days Nursing Homes 11.8 (a) Formulate (that is, setting up the objective function and constraints) Plus500 problem using LP. (18.5) (b) Use your formulation in part (a) to form a Microsoft Excel Solver spreadsheet to solve the LP problem. (46) (c) State the optimal solution and the value of the objective function. (5) Financial Applications 1 Excel Solver Project The Plus500 Brokerage firm has just been instructed by one of its clients to invest R250 000 of her money obtained recently through the sale of land holdings in Ohio. The client has a good deal of trust in the investment house, but she also has her own ideas about the distribution of the funds being invested. In particular, she requests that the firm select whatever stocks and bonds they believe are well rated, but within the following guidelines: (1) Municipal bonds should constitute at least 20% of the investment. (2) At least 40% of the funds should be placed in a combination of electronic firms, aerospace firms, and drug manufacturers. (3) No more than 50% of the amount invested in municipal bonds should be placed in a high-risk, high-yield nursing home stock. Subject to these restraints, the client's goal is to maximize projected return on investments. The analysts at Plus500, aware of these guidelines, prepare a list of high-quality stocks and bonds and their corresponding rates of return: INVESTMENT PROJECTED RATE OF RETURN (%) 5.3 6.8 Los Angeles municipal bonds Thompson Electronics, Inc. United Aerospace Corp. Palmer Drugs 4.9 8.4 Happy Days Nursing Homes 11.8 (a) Formulate (that is, setting up the objective function and constraints) Plus500 problem using LP. (18.5) (b) Use your formulation in part (a) to form a Microsoft Excel Solver spreadsheet to solve the LP problem. (46) (c) State the optimal solution and the value of the objective function