Longer-term investment program

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Reference no: EM13787832

Susan Wong wants to develop a linear programming model for her budget. The objective is to maximize her short-term investments during the year so she can take the money and reinvest at the end of the year in a longer-term investment program.

Susan has $3000 in her bank account at the beginning of this year. Her after-taxes-and-benefits salary is $29400 per year which she receives in 12 equal monthly paychecks ($2450/month) at the end of each month. Susan has computed her expected monthly liabilities for this year, as shown in the following table.

Month	Bills ($)	Month	Bills ($)
January	2860	July	3050
February	2750	August	2300
March	2550	September	1975
April	2120	October	1670
May	1205	November	2710
June	1600	December	2980

Susan has decided that she will invest any money she doesn't use to meet her liability each month in either 1-month, 3-month or 7-month short-term investment vehicles. The yield on a 1-month investment is 6% per year nominal (0.5%/month). The yield on a 3-month investment is 8% per year nominal (equivalent to 2% for 3 months). On a 7-month investment, the yield is 12% per year nominal.

Reference no: EM13787832

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