Question

In anticipation of the immense college expenses of their child, a couple has started an annual investment program on the child's twelfth birthday that will last until the twenty second birthday. Judging from their expected financial position over the next 10 years, the couple estimate that they will be able to invest the following amounts at the beginning of each year: Year 1 2 3 4 5 6 7 8 9 10 Amount 2 2 5 7 10 7 10 10 10 15 To avoid unpleasant surprises, the couple opts to invest the money very safely. The following options are open to them: 1. Insured savings with 2% annual yield. 2. Six-year government bonds that yield 5.9% annually The couple is expected to pay the child’s college tuition of $20K annually for four years starting from the beginning of year 7. They also have the option of taking a private 4-year term loan at the beginning of year 7, which charges an annual interest rate of 3%. I.e., the loan requires an annual interest payment for 4 years starting from year 8 and the principle payback by the end of year 10 (beginning of year 11). Set up an Excel linear program model to help the couple decide the optimal investment plan for the next 10 years and the private loan amount in order to meet the tuition payments from year 7 to year 10, and to maximize the cash position at the end of year 10 (or beginning of year 11).

          In anticipation of the immense college expenses of their child,
a couple has started an annual investment program on the child's
twelfth birthday that will last until the twenty second birthday.
Judging from their expected financial position over the next 10
years, the couple estimate that they will be able to invest the
following amounts at the beginning of each year:
Year
1
2
3
4
5
6
7
8
9
10
Amount
2
2
5
7
10
7
10
10
10
15
To avoid unpleasant surprises, the couple opts to invest the
money very safely. The following options are open to them:
1. Insured savings with 2% annual yield.
2. Six-year government bonds that yield 5.9% annually
The couple is expected to pay the child’s college tuition of
$20K annually for four years starting from the beginning of year
7.
They also have the option of taking a private 4-year term loan
at the beginning of year 7, which charges an annual interest rate
of 3%. I.e., the loan requires an annual interest payment for 4
years starting from year 8 and the principle payback by the end of
year 10 (beginning of year 11).
Set up an Excel linear program model to help the couple decide
the optimal investment plan for the next 10 years and the private
loan amount in order to meet the tuition payments from year 7 to
year 10, and to maximize the cash position at the end of year 10
(or beginning of year 11).

in anticipation of the immense college expenses of their child a couple has started an annual investment program on the childs twelfth birthday that will last until the twenty second birthda 93162

Added by Jeff S.

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