Question

The Heinlein and Krampf Brokerage firm has just been instructed by one of its clients to invest $250,000 of her money obtained recently through the sale of land holdings in Ohio. The client has a good deal of trust in the in¬vestment house, but she also has her own ideas about the distribution of the funds being invested. In par¬ticular, she requests that the firm select whatever stocks and bonds they believe are well rated, but within the following guidelines:
(a) Municipal bonds should constitute at least 20%of the investment.(b) At least 40% of the funds should be placed in acombination of electronic firms, aerospace firms,and drug manufacturers.(c) No more than 50% of the amount invested inmunicipal bonds should be placed in a high-risk,high-yield nursing home stock.Subject to these restraints, the client's goal is to max¬imize projected return on investments. The analysts at Heinlein and Krampf, aware of these guidelines prepare a list of high-quality stocks and bonds and their corresponding rates of return.

Answer 1

Answer: provided in the explanation segment

Explanation:

step by step process followed according.

The following is assumed as the decision variables:

a = Value of Dollars invested in Municipal Bonds

b = Value of Dollars invested in Thompson Electronic Inc

c = Value of Dollars invested in United Aerospace Corp

d = Value of Dollars invested in Palmer Drugs

e = Value of Dollars invested in Happy Days Nursing Home

Objective or Goal Function:

Maximize M = 5.3 a + 6.8 b + 4.9 c + 8.4 d + 11.8 e

Subjected to the conditions or constraints:

Constraint 1: Amount came from selling land in Ohio

a + b + c + d + e <= 250000

Constraint 2: Municipal bonds must be at least 20% of the total investments, hence

a >= 0.2 (a+b+c+d+e)

Constraint 3: Electronic + Drug + Aero Space must be at least 40 % of the total funds, hence

b + c + d >= 0.4 (a + b + c + d + e)

Constrain 4: e <= 0.5 a

All these decision variables must be non negative. That is:

a >= 0, b >= 0,c >= 0, d >= 0, and e >= 0

Open Excel, Click the Data menu in the main menu bar

click Solver on the top right corner just below the Data Analysis

Enter the above formulae in objective cells

Now, in the set objective box, enter the cell reference of the cell having the formula

It is asking you to set the Target cell , equal to Maxima or Minima

Once the values are formed in to an augmented matrix, can formulate it as a Linear Programming (LP) model

Tabulate those values and follow the North West corner method to climb down like a ladder

Start at the cell c11, check the neighbors c12 and c21 - if you can fit the values satisfying the constraints, fit it there - if not climb down to c22 and repeat the same for the neighbors of the new cell - viz c23 and c32 and then climb down to c33 and repeat the same untill the results is obtaine