Management Science

An Introduction to Management Science

george johnson recently inherited a large lum sum of money; he wants to use a portion of this money to set up a trust fund for his two children. The trust fundhas twoinvestment option: (1) a bond fund and (2) a stock fund. The projected returns over the life of the investments are 6% for the bond fund and 10% for the stock fund.Whatever portion of the inheritance he finally decides o commit to the trust fund, he wants to invest at least 30% of that amount in the bond fund. In addition, hewants to select a mix that will enable him to obtain a total return of at least 7.5%. Formulate a linear programming model that can be used to determine the percentagethat should be allocated to each of the possible investment alternatives. Solve the problem using the graphical solution procedure.