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Investment Problem (Optimization Technique)

Investment Problem (Optimization Technique)

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Published by: Tech_MX on Sep 03, 2012
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11/13/2013

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INVESTMENTS PROBLEM
(3.4-11)
9/3/2012
1
 
PROBLEM
 Al Ferris has $60,000 that he wishes to invest now in orderto use the accumulation for purchasing a retirementannuity in 5 years.
 After consulting with his financial adviser, he has beenoffered four types of fixed-income investments, which we will label as investments A, B, C, D.
9/3/2012
2
 
CONSTRAINTS
Investments C and D will each be available at one time in the
future.
Each dollar invested in C at the beginning of year 2 returns$1.90 at the end of year 5.
Each dollar invested in D at the beginning of year 5 returns$1.30 at the end of year 5.
 Al wishes to know which investment plan maximizes the
amount of money that can be accumulated by the beginning of  year 6.
9/3/2012
3

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