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  3. huey mcduck has received $70,000 from his rich unc

Huey McDuck has received $70,000 from his rich uncle and wants to determine how much to...

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Operations Management

Huey McDuck has received $70,000 from his rich uncle and wantsto determine how much to invest in each of four differentinvestments: municipal bonds expected to return 8.5%, CDs expectedto return 5%, T-bills expected to return 6.5% and a stock fundexpected to return 13%.

The following guidelines have been established to ensure thatthe portfolio is diversified for reduced risk.

  1. No more than 20% of the total investment should be in municipalbonds
  2. At least 30% of the investment should be in T-bills

Write the LP formulation

Set the problem up in Excel and solve using ExcelSolver

Report the optimal solution and total expectedreturn

Answer & Explanation Solved by verified expert
4.0 Ratings (530 Votes)
Let the amount of money invested in municipal bonds CDsTbills and stock funds be x1x2x3 and x4 respectivelySo the profit function which we need to maximize isZ 1085x1    See Answer
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