Ivana Miracle Wishes to Invest Up to Her Full Inheritance

question 3

Essay

Ivana Miracle wishes to invest up to her full inheritance of $300,000, and her goal is to minimize her risk subject to an expected annual return of at least $30,000.She has decided to invest her money in any of three possible ways-CDs, which pay a guaranteed 6 percent; stocks, which have an expected return of 15 percent; and a money market mutual fund, which is expected to return 8 percent.Risk factors are 1.0 for the CDs, 3.6 for the stocks, and 1.8 for the money market fund.Formulate this as a linear program.

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Definitions:

Leverage Ratio

A financial ratio indicating the degree to which a company or individual is financing its operations through debt, compared to its equity.

LIFO

"Last In, First Out," an inventory management method where the most recently produced or acquired items are the first to be used or sold.

FIFO

An accounting and inventory method where the first items produced or acquired are the first ones to be sold or used, standing for "First-In, First-Out".

Current Ratio

A liquidity ratio that measures a company's ability to cover its short-term obligations with its current assets.