Problem 2-25 (Algorithmic)
George Johnson recently inherited a large sum of money; he wantsto use a portion of this money to set up a trust fund for his twochildren. The trust fund has two investment options: (1) a bondfund and (2) a stock fund. The projected returns over the life ofthe investments are 8% for the bond fund and 20% for the stockfund. Whatever portion of the inheritance he finally decides tocommit to the trust fund, he wants to invest at least 40% of thatamount in the bond fund. In addition, he wants to select a mix thatwill enable him to obtain a total return of at least 5.5%.
- Formulate a linear programming model that can be used todetermine the percentage that should be allocated to each of thepossible investment alternatives. If required, round your answersto three decimal places.
| Let B | = | percentage of funds invested in the bond fund |
| S | = | percentage of funds invested in the stock fund |
| B | + | S | | | |
| s.t. | | | | | | |
| B | | | | | Bond fund minimum |
| B | + | S | | | Minimum return |
| B | + | S | | | Percentage requirement |
- Solve the problem. If required, round the answers to onedecimal place.
Optimal solution: B = , S =
Value of optimal solution is % ????
