Q1. Explain, how we derive the objective function, Z and each of the six subject to constraints / guidelines at the bottom right of Exhibit 4.7 (and on power point 4-17) from the information listed on power point 4-16? Hint: Go over text book pages 122-127.

Q2. Exhibit 4.7 lists Solver solutions in cells B13:B17. What is Solver recommending the investor to invest in and how much?

LUUUUU Exhon Microsoft Exce Home sert Pad total return A Hide Detail Data Analysis From From Access Web Existing Connections Group Ungroup Subtotal From From Other Text Sources Get External Data d sortiter Sort & Filter Refresh All All LOT In Connections Text to Remove ans Duplicates V Data Consolidate What- ic Analysis Data Tools Outline H . B17 - =D4*B13+54*814+F4*B15+G4*B16 A B C D 1 An Investment Example First guideline, =D6*B13 F G H X1 X3 X2 0.05 X4 0.13 0.085 0.065 3 Investments: 4 Rate of return: 5 Guidelines: 6 1. municipal bonds 7 2. CDs 8 3. treasury bills and CDs 4. ratio 10 total invested Guidelines Achievement/Constraints Requirements Slack/Surplus 0.00 14000.00 14000.00 -70000.00 0.00 70000.00 38181.82 21000.00 17181.82 0.00 0.00 0.00 70000.00 70000.00 0.00 -12 -1.2 12 Returns: X1 = 0 invested in municipal bonds X2 = 0 invested in CDs X3 = 38181.8 invested in treasury bills X4 = 31818.2 invested in stock fund Z = 6618.18 total return 18 Total investment requirement, =D10*B13+E10*B14+F10*B15+ G10*B16 LUUUUU Exhon Microsoft Exce Home sert Pad total return A Hide Detail Data Analysis From From Access Web Existing Connections Group Ungroup Subtotal From From Other Text Sources Get External Data d sortiter Sort & Filter Refresh All All LOT In Connections Text to Remove ans Duplicates V Data Consolidate What- ic Analysis Data Tools Outline H . B17 - =D4*B13+54*814+F4*B15+G4*B16 A B C D 1 An Investment Example First guideline, =D6*B13 F G H X1 X3 X2 0.05 X4 0.13 0.085 0.065 3 Investments: 4 Rate of return: 5 Guidelines: 6 1. municipal bonds 7 2. CDs 8 3. treasury bills and CDs 4. ratio 10 total invested Guidelines Achievement/Constraints Requirements Slack/Surplus 0.00 14000.00 14000.00 -70000.00 0.00 70000.00 38181.82 21000.00 17181.82 0.00 0.00 0.00 70000.00 70000.00 0.00 -12 -1.2 12 Returns: X1 = 0 invested in municipal bonds X2 = 0 invested in CDs X3 = 38181.8 invested in treasury bills X4 = 31818.2 invested in stock fund Z = 6618.18 total return 18 Total investment requirement, =D10*B13+E10*B14+F10*B15+ G10*B16