Ivana Miracle Wishes to Invest Her Full Inheritance of $300,000

question 7

Essay

Ivana Miracle wishes to invest 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:

Luxury Tax

A tax imposed on expensive goods and services, often considered non-essential, as a means of raising government revenues without placing the burden on essential items.

Tax Incidence

The distribution of the economic burden of a tax between buyers and sellers, depending on the elasticity of demand and supply.

Net Profits

The actual profit after working expenses not included in the calculation of gross profit have been paid.

Goods And Services

Refers to the tangible products (goods) and intangible items (services) produced and offered in an economy.