a) Express this problem as a linear programming model with two decision variables. (b) Solve the problem with the graphical solution procedure and define the optimum solution.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter9: Decision Making Under Uncertainty
Section: Chapter Questions
Problem 73P
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A young computer engineer has $12,000 to invest and three different investment options (funds) to choose from. Type 1 guaranteed investment funds offer an expected rate of return of 7%, Type 2 mixed funds (part is guaranteed capital) have an expected rate of return of 8%, while an investment on the Stock Exchange involves an expected rate of return of 12%, but without guaranteed investment capital. Computer engineer has decided not to invest more than $2,000 on the Stock Exchange in order to minimize the risk. Moreover for tax reasons, she needs to invest at least three times more in guaranteed investment funds than in mixed funds.

Assume that at the end of the year the returns are those expected; she is trying to determine the optimum investment amounts.

(a) Express this problem as a linear programming model with two decision variables.
(b) Solve the problem with the graphical solution procedure and define the optimum solution.

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