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Question 1 (10 points) Listen The National Credit Union has $500,000 available to invest in a 12-month commitment. The money can be placed in
Question 1 (10 points) Listen The National Credit Union has $500,000 available to invest in a 12-month commitment. The money can be placed in Treasury notes yielding an 4% return, in municipal bonds at an average rate of return of 5%, or in corporate bonds yielding an 6.5% average return. Credit union regulations require diversification to the extent that at least 50% of the investment be placed in Treasury notes. Because of defaults in such municipalities as Cleveland and New York, it is decided that no more than 30% of the investment be placed in bonds. Total amount invested in corporate bonds should not exceed 33% to reduce risk, as well. a. How much should the National Credit Union invest in each security so as to maximize its return on investment? b. If the Treasury note yield drops to 3%, how would that affect the decision in (a)? 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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