Eastern Alabama Trust invests in various types of securities.
They have $5 million for immediate investment and wish to maximize
interest earned over the next year. Risk is not a factor. Four
investment alternatives include Bonds, Stocks, Gold and Land. The
expected return for Bonds is 6%, Stocks 14%, Gold 10%, and Land 5%.
The maximum amount to be invested for each alternative is $3
million for Bonds, $3 million for Stocks, $2 million for Gold, and
$1 million for Land. To structure the portfolio, the senior VP has
specified at least 40% of the investment has to be in corporate
bonds and common stock; and no more than 20% of the investment is
to be in Land.
a. What are the Decision Variables?
b. What is the Objective Function?
c. What are the Constraint Equations including non-negativity
constraints?
