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Using Linear Programming to Solve Investment Problems

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by

carrie blakeman

on 3 November 2013

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Transcript of Using Linear Programming to Solve Investment Problems

Using Linear Programming to Solve Investment Problems
What is linear programming?
A procedure for finding the maximum or minimum value of a function in two variables subject to given constraints on the variables.
Variables, Objective & Constraints
Variables : X = First Bank Y = City Bank

Objective : I(x,y) = .06x + .065y

Constraints : x > or = 0
y > or = 0
x < or = 7,500
y > or = 1,000
y < or = 7,000
x + y < or = 11,000
Solution
I(x,y) = .06(4) + .065(7)
.24 + .455
.695
x = 4,000 y = 7,000
Interest - $695

Investment
Word Problem
Diego wants to invest up to $11,000 in certificates of deposit at First Bank and City Bank. He does not want to deposit more than $7,500 at First Bank. He will deposit at least $1,000 but no more than $7,000 at City Bank. First Bank offers 6% simple interest on deposits, while City Bank offers 6.5% simple interest. How much should Diego deposit into each account so he can earn the most interest possible in one year?
This is saying that 4,000 will be put into First Bank and 7,000 will be put in City Bank.
Carrie Blakeman

&
Siri Horton
Full transcript