Question

As part of the settlement for a class action lawsuit, XTech must provide sufficient cash to make the following annual payments. Year Payments (S) 10,500 12,000 11,000 14,000 17,500 22,000 6 The annual payments are to made at the beginning of cach year. The court will approve an amount to be paid to a trustee now that, along with earnings on its investment, will cover the annual payments. Investment of the funds will be limited to two classes of government securities, whose investment information is provided in the table below (with par values of $1,000 per unit), and any remaining funds will be placed into a savings account, which earns a 2.6% annual interest rate Security | Market Price Annual Coupon Rate Maturity Class A $1,055 $1,025 6.825% 5.350% Beginning of Year 4 Beginning of Year 5 Class B Formulate the linear programming model to determine the minimum total amount of cash F that XTech must give to the trustee now to fund the settlement plan. Let A and B denote the number of units of Class A and Class B securities, respectively, to purchase now, and let S, denote the amount that is put into savings at the beginning of year i, i 1,2,3,4,5. You do not need to solve the LP

Answer 1