George Johnson recently inherited a large sum of money; he wants to use a portion of this money to set up a trust fund for his two children. The trust fund has two investment options: (1) a bond fund and (2) a stock fund. The projected returns over the life of the investments are 6% for the bond fund and 10% for the stock fund. Whatever portion of the inheritance he finally decides to commit to the trust fund, he wants to invest at least 30% of that amount in the bond fund. In addition, he wants to select a mix that will enable him to obtain a total return of at least 7.5%. Let B = percentage of funds invested in the bond fund S = percentage of funds invested in the stock fund Max 0.060 B + 0.100 S s.t. 1 B 0.300 Bond fund minimum 0.060 B + 0.100 S 0.075 Minimum return 1 B + 1 S = 1 Percentage requirement B,S 0

1. Spreadsheet Model with Solver setup