At the beginning of January, Chico has $9500 in cash. In each month from January to April, Chico also receives certain revenues, after which it pays bills. The revenue received and bill paid are listed in table below.
Month
Jan
Feb
Mar
Apr
Revenues
$4000
$8000
$3000
$3000
Bills
$6000
$5000
$5000
$2500
After paying bills, if Chico has extra cash, he can make one-month, two-month, three- month, or four-month investments. The interest rates per month for these investments are shown below.
1-month investment
0.10%
2-month investment
0.50%
3-month investment
1.00%
4-month investment
2.00%
For example, suppose Chico spends $100 for two-month investment at the beginning of February. Then two months later (at the beginning of April), Chico is going to receive $100×(1+0.5%)×(1+0.5%)=$101.0025, which means this $100 investment earns a profit of $1.0025 in two months.
At the beginning of each month, the sequence of activities is: 1) receiving revenues; 2) receiving investment returns; 3) paying bills; 4) making investments
Determine the optimal investment strategy to maximize cash on hand at the beginning of May.
Build an Excel model and use Solver to find the optimal solution. Make sure your model is robust so that if a number is changed (e.g., interest rate), Solver can still produce correct result.
