Question
We are going to manage an investment portfolio over a 6-year time horizon. We begin with $1,000,000, and at various times we can invest in
We are going to manage an investment portfolio over a 6-year time horizon. We begin with $1,000,000, and at various times we can invest in one or more of the following: (a) Savings account X, annual yield 5%, (b) Security Y , 2-year maturity, total yield 12% if bought now, 11% thereafter, (c) Security Z, 3-year maturity, total yield 18%, and (d) Security W, 4-year maturity, total yield 24%. To keep things simple we will assume that each security can be bought in any denomination. We can make savings deposits or withdrawals anytime. We can buy Security Y any year but year 3. We can buy Security Z anytime after the rst year. Security W, now available, is a one-time opportunity. Write down a LP model to maximize the nal investment yield. Assume all investments must mature on or before year 6 and you cannot sell securities in between. Dene your decision variables and constraints clearly.
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