Problem algebraically for linear programming model

Assignment Help Operation Management

Reference no: EM132250575

Bernardo Bellotto is a financial analyst with Canal Financial Planning Inc who specializes in designing retirement income portfolios for retirees using corporate bonds. He has just completed a consultation with a client who expects to have $750,000 in liquid assets to invest when she retires next month. Bernardo and his client agreed to consider upcoming bond issues from the following six companies:

Company Return (%) Years to Maturity Rating

Acme Chemical 8.25 11 1-Excellent

Bravo Films 9.00 10 3-Good

Canada Agriculture 10.00 6 4-Fair

Dynamic Analytics 8.50 10 1-Excellent

Express Electronics 10.60 7 3-Good

Frieda Fashions 7.80 13 2-Very Good

Return represents the expected annual yield on each bond, the column labeled “Years to Maturity” indicates the length of time over which the bonds will be payable, and the column labeled “Rating” indicates an independent underwriter’s assessment of the quality or risk associated with each issue. Bernardo believes that all the companies are relatively safe investments. However, to protect his client’s income, Bernardo and his client agreed that no more than 25% of her money should be invested in any one investment and at least half of her money should be invested in long term bonds that mature in 10 or more years. Also, even though Bravo Films, Canada Agriculture, and Express Electronics offer the highest returns, it was agreed that no more than 35% of the money should be invested in these bonds because they also represent the highest risks. Bernardo needs to determine how to allocate his client’s investments to maximize her income while meeting their agreed upon investment restrictions.

a. Formulate the problem algebraically for a linear programming model for this problem.

b. Solve this problem using Excel.

Reference no: EM132250575

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