Introduction

Given:
Left $3,800 to start the new year with
Expected monthly liabilities for the coming year
After taxes and benefits salary is $29,400/ year = $2450/month
Task:
Plan how much money should be invested in the 1 month, 3 month, or 7
th
month short term
investment vehicles with yield of 6%, 8% and 12% per annum respectively
To maximise her investment return during the year
In this case, we have defined the objective function to be maximisation of investment return. As all
the functions in this problem are linear, we have adopted the Linear- Programming (LP) model.
Formulation
(darrens part)
Solution

(darrens part)
Answer Report

Sensitivity Report

Sensitivity range of the objective function coefficient


Objective Function: Max Z= 0.005(1-month investment) + 0.02 (3-month investment) + 0.07 (7-
month investment)
There is more than one optimal solution as there are no zeros in the allowable increase or
allowable decrease columns for the variables. This means that there are multiple proposed
investment schedule that Susan can use to maximise investment returns, given its constraints. The
solution we have obtained is degenerate.

The sensitivity range for the objective coefficient is reflected above, where the maximum is
(objective function + allowable increase) and the minimum is (objective coefficient + allowable
decrease) which the current optimal solution point will remain optimal.

For instance in January, if the coefficient value for 1-month investment is 0.005 per annum is not
increased and is decreased to infinity, the optimal investment plan remains unchanged. It means
that the interest rate for 1-month investment plan varies from 0 to 0.005; considering that having
negative interest rate is unrealistic for any investment plan.