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Can you please explain F I am so lost and don’t understand the…
Can you please explain F I am so lost and don’t understand the slack or surplus.
As a 401K retirement plan participant you have to make personal decisions regarding your own investment objectives. Suppose you have $10,000 to divide among four investment alternatives in your 401K retirement plan. The investment alternatives and historical returns are as follows;
· Real Estate (RE) = 8%
· CD = 4%
· Mutual Fund (MF) = 6%
· Bonds = 7%
You will follow the investment allocation guidelines below.
1. More money should be in real estate than in CDs, at a rate of at least 2 to 1. [Hint: That means that RE > 2*CD]
2. At least 50% ($5,000) must be in mutual funds and bonds combined.
3. No more than 20% ($2,000) can be in bonds alone.
4. At least 2.5% ($250) must be invested in each alternative.
5. All of the $10,000 must be invested.
Answer the parts below, and then use the template, Investment 1, to solve for the maximum profit. Note that the percentages must be expressed as proportions in the solution. (4 points) Be sure to choose “assume Linear Model” and “Assume Non-negative” from Solver’s Options dialogue box.
a. 2 Points: In cell B3, use the Excel’s built-in function named “SUMPRODUCT” to input a formula for the objective function. Be sure to reference the appropriate cells.
b. 2 Points: In cells B9:E9, enter the investment return coefficients for the objective function. Make sure the coefficients are input as proportions, not percents.
c. 8 Points: In cells B12:E19, enter the constraint coefficients for each of the eight constraints.
d. 4 Points: In cells F12:F19, enter the appropriate constraint values.
e. 8 Points: In cells G12:G19, use the “SUMPRODUCT” function to input a formula for the amount of each resource used or limitation imposed. Be sure to reference the appropriate cells.
f. 4 Points: In cells H12:H19, write the appropriate formulas to determine the amount of slack or surplus associated with each resource or limitation.
g. 4 Points: In cells I12:I19, write the type of inequality associated with each constraint using either “<=," ">=,” or “=.”
h. 4 Points: In cells J12:J18, write the appropriate word (either “Slack” or “Surplus”) to indicate the nature of the leftover resources or limitations.
This is a snapshot of the Excel Template, Investment 1. Please make this template in Excel. This is what you will use to answer questions a. through h.
Image transcription text
A B C D E F G H K Question 3 Part a Grader Max Return X1 RE X2 CD X3 MF X4 Bonds Grader Dec Vars Part
b X1 RE X2 CD X3 MF X4 Bonds Grader Return Coefficients Part c Part d Part e Part f Part g Part h Constraint
Amount Slack or Type Slack or Constraint Coefficients X1 RE X2 CD X3 MF X4 Bonds Value Use… Show more
MathStatistics and Probability
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Step-by-step explanation
A B C D E F G H I J
1 Question 3
2
Part a
Grader
3
Max Return
0.08X+0.04X+0.06X+0.07X
4
5
X1 RE
X2 CD
X3 MF
X4 Bonds
Grader
6
Dec Vars
Assume linear model
Assume linear model
Assume linear model
Assume linear model
7
8
Part b
X1 RE
X2 CD
X3 MF
X4 Bonds
Grader
9
Return Coefficients
0.08
0.04
0.06
0.07
10
Part c
Part d
Part e
Part f
Part g
Part h
11
Constraint Coefficients
X1 RE
X2 CD
X3 MF
X4 Bonds
Constraint Value
Amount Used
Slack or Surplus
Type Inequality
Slack or Surplus
12
RE to CD Ratio
-1
2
0
0
< 0 2X-X+S < Slack 13 MF + Bonds Combined 0 0 1 1 >
5000
X+X-S+A
>
Surplus
14
Bonds <=$2000 0 0 0 1 < 2000 X+S < Slack 15 RE Alone 1 0 0 0 >
0
Non Negative assumptions
>
Surplus
16
CD Alone
0
1
0
0
>
0
Non Negative assumptions
>
Surplus
17
MF Alone
0
0
1
0
>
0
Non Negative assumptions
>
Surplus
18
B Alone
0
0
0
1
>
0
Non Negative assumptions
>
Surplus
19
All Funds Invested
1
1
1
1
< 10000 X+X+X+X+S < Slack
