Question: Eastern Alabama Trust invests in various types of securities. They have $5 million for immediate investment and wish to maximize interest earned over the next year. Risk is not a factor. Four investment alternatives include Bonds, Stocks, Gold and Land. The expected return for Bonds is 6%, Stocks 14%, Gold 10%, and Land 5%. The maximum amount to be invested for each alternative is $3 million for Bonds, $3 million for Stocks, $2 million for Gold, and $1 million for Land. To structure the portfolio, the senior VP has specified at least 40% of the investment has to be in corporate bonds and common stock; and no more than 20% of the investment is to be in Land.
a. What are the Decision Variables?
b. What is the Objective Function?
c. What are the Constraint Equations including non-negativity constraints?