You have $12,000 to invest, and three different funds from which to choose. The municipal bond fund has a 7% return, the local bank's CDs have an 8% return, and the high-risk account has an expected (hoped-for) 12% return. To minimize risk, you decide not to invest any more than $2,000 in the high-risk account. For tax reasons, you need to invest at least three times as much in the municipal bonds as in the bank CDs. Assuming the year-end yields are as expected, what are the optimal investment amounts?

Instructions to answer the following questions.

You must write the answer to each of the question in the box provided. Any answer written outside the box will be ignored for grading purpose.

1. Identify the decision variables.

x 1 =

x 2 =

x 3 =

2. Write down the Objective function

= (_____)*(x 1 ) + (0.08)*(______) + (______)*(_______)

3. Specify each of the constraints.

(_____)*(x 1 ) + 1*(______) + (______)*(_______)= (______)

(_____)*(_______)+(______)*(_______)+(______)*(____)<= (______)

(_____)*(_______)+(______)*(_______)+(______)*(____)>= (______)

4. Do you need to maximize or minimize the Objective function?

_______________________________________?