QUESTION 3:

As a 401K retirement plan participant you have to make personal decisions regarding your own investment objectives. Suppose you have $10,000 to divide among four investment alternatives in your 401K retirement plan. The investment alternatives and historical returns are as follows;

Real Estate (RE) = 8%

CD = 4%

Mutual Fund (MF) = 6%

Bonds = 7%

You will follow the investment allocation guidelines below.

More money should be in real estate than in CDs, at a rate of at least 2 to 1.[Hint:That means that RE > 2*CD]

At least 50% ($5,000) must be in mutual funds and bonds combined.

No more than 20% ($2,000) can be in bonds alone.

At least 2.5% ($250) must be invested in each alternative.

All of the $10,000 must be invested.

Use the spreadsheet template in the worksheet named Investment 1 to formulate and solve the LP problem for the maximum return. Note that the percentages must be expressed as proportions in the solution.

Answer the parts below, and then use the LP template to solve for the maximum profit. (4 points) Be sure to choose assume Linear Model and Assume Non-negative from Solvers Options dialogue box.

2 Points: In cell B3, use the Excels built-in function named SUMPRODUCT to write a formula for the objective function.Be sure to reference the appropriate cells.

2 Points: In cells B9:E9, enter the investment return coefficients for the objective function.Make sure the coefficients are input as proportions, not percents.

8 Points: In cells B12:E19, enter the constraint coefficients for each of the eight constraints.

4 Points: In cells F12:F19, enter the appropriate constraint values.

8 Points: In cells G12:G19, use the SUMPRODUCT function to write a formula for the amount of each resource used or limitation imposed.Be sure to reference the appropriate cells.

4 Points: In cells H12:H19, write the appropriate formulas to determine the amount of slack or surplus associated with each resource or limitation.

4 Points: In cells I12:I19, write the type of inequality associated with each constraint using either <=, >=, or =.

4 Points: In cells J12:J18, write the appropriate word (either Slack or Surplus) to indicate the nature of the leftover resources or limitations.

Question 3
Part a		Grader
Max Return
	X1 RE	X2 CD	X3 MF	X4 Bonds	Grader
Dec Vars
Part b	X1 RE	X2 CD	X3 MF	X4 Bonds	Grader
Return Coefficients
Part c					Part d	Part e	Part f	Part g	Part h
Constraint Coefficients	X1 RE	X2 CD	X3 MF	X4 Bonds	Constraint Value	Amount Used	Slack or Surplus	Type Inequality	Slack or Surplus
RE to CD Ratio
MF + Bonds Combined
Bonds <=$2000
RE Alone
CD Alone
MF Alone
B Alone
All Funds Invested
	Grader				Grader	Grader	Grader	Grader	Grader