Table 8-5 Ivana Myrocle Wishes to Invest Her Inheritance of $200,000 So

question 10

Multiple Choice

Table 8-5
Ivana Myrocle wishes to invest her inheritance of $200,000 so that her return on investment is maximized, but she also wishes to keep her risk level relatively low. 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 13 percent; and a money market mutual fund, which is expected to return 8 percent. She has decided that any or all of the $200,000 may be invested, but any part (or all) of it may be put in any of the 3 alternatives. Thus, she may have some money invested in all three alternatives. In formulating this as a linear programming problem, define the variables as follows:
-According to Table 8-5, which describes an investment problem, which of the following would be the most appropriate constraint in the linear programming problem?

• A) 0.06C + 0.13S + 0.08M ≤ 200000
• B) C + S + M ≥ 200000
• C) C + S + M ≤ 200000
• D) C + S + M = 200000
• E) None of the above

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Definitions:

Installment Note

An installment note is a form of debt that requires the borrower to make scheduled payments (including both principal and interest) over a set period until the debt is paid off.

Bearer Bonds

Bonds not registered to any owner, allowing whoever holds the bond physically to claim the interest payments or the principal.

Unsecured Bonds

Bonds issued without collateral, relying on the issuer's creditworthiness for support.

Term Bonds

Bonds that have a set maturity date on which the principal amount will be repaid to bondholders.