Question
In anticipation of the immense college expenses of their child, a couple has started an annual investment programme on their childs 8 th birthday that
In anticipation of the immense college expenses of their child, a couple has started an annual investment programme on their childs 8 th birthday that will last until the 18 th birthday. The couple estimates that they will be able to invest the following amounts at the beginning of each year: Year 1 2 3 4 5 6 7 8 9 10 Amount 2000 2000 2500 2500 3000 3500 3500 4000 4000 5000
To avoid unpleasant surprises, the couple opts to invest the money safely in the following options: 1. Insured savings with 7.5% annual yield. 2. Six-Year government bonds that annually yield 7.9% and have a market price equal to 98% of the face value. 3. Nine-Year municipal bonds that annually yield 8.5% and have a market price of 102% of its face value. Formulate a linear programming model for the above situation, which when solved, would tell the couple how much to invest each year in each of the three schemes.
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