A conservative investor has $97,000 to invest. The investor has decided to use three vehicles for generating income: municipal bonds, a certificate of deposit (CD), and a money market account. After reading a financial newsletter, the investor has also identified several additional restrictions on the investments.
1-No more than 40 percent of the investment should be in bonds.
2-The proportion allocated to the money market account should be at least double the amount in the CD.
The annual return will be 8 percent for bonds, 9 percent for the CD, and 7 percent for the money market account. Assume the entire amount will be invested.
Formulate the LP model for this problem using Lingo software, ignoring any transaction costs and the potential for different investment lives. Assume that the investor wants to maximize the total annual return.
Percent of investment Income 31%
Amount return 4%