A portfolio manager in charge of a bank portfolio has $10 million to invest. The securities available for purchase, as well as their respective quality ratings, maturities, and yields, are shown in the table below:
The bank places the following policy limitations on the portfolio manager's actions:
1. Government and agency bonds must total at least $4 million.
2. The average quality of the portfolio cannot exceed 1.4 on the bank's quality scale. (Note that a low number on this scale means a high-quality bond.)
3. The average years to maturity of the portfolio must not exceed 5 years.
Assuming that the objective of the portfolio manager is to maximize after-tax earnings and that the tax rate is 50%, formulate a linear program that can be used to determine how much money to invest in each type of bond.
Definitions:
Career-planning Systems
Structured programs and tools that help individuals develop and manage their career paths according to their strengths, interests, and market demand.
Forced-Distribution Method
A performance evaluation technique where employees are ranked in accordance with a predetermined distribution curve, forcing managers to identify top and bottom performers.
Disengagement Stage
The phase in a person's career, usually towards the end, where they gradually begin to withdraw from their work-related roles and responsibilities.
Establishment Stage
A phase in an individual's career where they seek to make a mark in their chosen field through steady employment and professional growth.
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