1205 Sfa 08W
1205 Sfa 08W
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MGSC 1205.2
****FINAL EXAMINATION****
SOLUTION KEY
Winter 2008
2. Your exam paper consists of 8 pages. Please make sure that you have a complete set of exam paper.
The point total is 100.
4. Remember that you must define all variables that you introduce and you must give WORD
answers to word problems.
5. Answer all questions on the exam paper. Use the backs of pages for extra work space.
7. No cell phones, PDA’s and other electronic devices are permitted, except calculators.
Simple Interest F = P (1 + rt ) P = F (1 + rt ) −1
1
F = P (1 + i ) P = F (1 + i )
−n
Compound Interest n
=F
(1 + i ) n
1 − (1 + i ) i
−n
Present Value of an Annuity P=R R=P
1 − (1 + i )
−n
i
reff = (1 + i ) −1
m
Effective interest rate
#2. The Recycling Alliance of South Hubbards (TRASH) operates two major collection depots throughout the
south shore area of the province, and ships used newspapers to three processing plants, A, B, and C. The following
table gives the cost per ton shipped from each depot to each plant, along with the maximum amounts that can be
collected at the depots each week and the minimum amounts required each week at the plants for processing.
Formulate an LP model to help TRASH determine that amount of used newspaper to ship from each depot to each
processing plant per week in order to minimize their shipping costs. DO NOT SOLVE.
From\To Plant A Plant B Plant C Max tons avail
Depot I $70 $35 $40 170
Depot II $25 $65 $80 250
Min tons needed 160 125 95
9 pts Let A1, B1, & C1 be # tons of old newspapers shipped from Depot I to Plants A, B, and C;
Let A2, B2, & C2 be # tons of old newspapers shipped from Depot II to Plants A, B, and C.
25
B
20
C
15
(3)
10
D
5
(2)
0
A
0 10 20 30 40
b) Label all feasible corner points and determine their coordinates. Determine the optimal corner point and the
corresponding objective function value.
4 pts
Corner Coordinates P = 2x + 5y
A (0, 0) 0
C (10, 15) 95
Therefore, the optimal solution is corner B, where x = 0, y = 20, and Max P = 100.
2 pts
F5 = sumproduct($B$4:$E$4,B5:E5)
F8 = copy F5
c) In the optimal solution, how many units of each product will be made?
2 pts
VCR: zero
Stereo: 380 units
TV: 0
DVD: 1060
d) Which resource(s) is/are binding? What is the corresponding shadow price?
e) Which resource(s) is not binding? How many units are not used?
f) What is the new profit if the number of nonelectronic components available is down to 4000 units?
1 pt
Profit remains to be $69,400 because the constraint is not binding and shadow
price = 0.
g) What is the new profit if the number of electronic components is increased by 400 units (to a total of
5100units)?
h) If you could hire an extra hand to work in the assembly department, what is the maximum hourly wage you
would like to pay? How many more hours do you like to get?
2 pts
The maximum wage = $24 per hour
i) What would be the total profit if the management decides to make 100 TV sets?
1 pt
P = 69,400 – 100*8 = 68,600
j) What is the minimum profit per unit for VCR before Anderson should consider producing them?
2 pts
$30
k) Now, Anderson plans to have promotional sales on DVD payers. How much could they low the price per unit
for DVD players so that the optimal production plan is not affected? What would be the new profit after the price
is reduced?
2 pts The maximum discount in price is $5 per unit. The new profit would be $64,100.
a) Let F1 = number of full time workers working in the shift 1, from 7 am to 3 pm, similarly for F2, F3, P1, P2,
P3, & P4. Determine the daily labour cost function.
1 pt Minimize C = 96 ( F1 + F2 + F3 ) + 40 ( P1 + P2 + P3 + P4 )
b) The number of workers needed is listed in the table above right for each of the indicated time blocks. Develop
a constraint function for each of the eight time blocks, where number of workers working is more than or equal
to the number of workers needed in that time period.
Workers
Hours F1 F2 F3 P1 P2 P3 P4 needed
7 am to 9 am F1 P1 11
9 am to 11 am F1 P1 11
11 am to 1 pm F1 F2 P2 24
1 pm to 3 pm F1 F2 P2 16
3 pm to 5 pm F2 F3 P3 10
5 pm to 7 pm F2 F3 P3 22
7 pm to 9 pm F3 P4 17
9 to 11 pm F3 P4 6
4 pts Therefore,
F1 + P1 ≥ 11
F1 + F2 + P2 ≥ 24
F2 + F3 + P3 ≥ 22
F3 + P4 ≥ 17
c) At least one full time worker must be available during the hour before opening and after closing. Additionally,
at least 30% of the employees should be full-time (8-hour) workers during the restaurant’s busy periods from
11:00 am to 1:00 pm and 5:00 pm to 7:00 pm. Write a constraint for each of the conditions.
F1 ≥1 F1 + F2 ≥ 0.3( F1 + F2 + P2 )
4 pts
F3 ≥1 F3 + F2 ≥ 0.3( F3 + F2 + P3 )
#7 Angela Tykes, an investment counselor, must plan a $75,000 portfolio for investment over the next year (four
quarters). She has three investment choices. The table below shows all these options with the return rates and
maturities. All the options are available at the beginning of each quarter. Since choice C is relatively risky, Angela
wants no more $20,000 in the option. She must also provide at least $3,000 at the end of quarters 1, 2, & 3, while
maximizing the total portfolio at the end of the year. Formulate the appropriate LP model. DO NOT SOLVE.
9 pts
Option A B C Maximize F = 1.03 A4 +1.08 B3 +1.15 C1
Return/period 3% 8% 15%
Maturity 3 months 6 months 1 year s.t.
t =0 A1 + B1 + C1 ≤ 75 ,000
t =1 1.03 A1 − A2 − B 2 ≥ 3,000
t =2 1.03 A2 +1.08 B1 − A3 − B3 ≥ 3,000
t =3 1.03 A3 +1.08 B2 − A4 ≥ 3,000
#8. You deposit $200 in an account that pays 4.5% interest compounded monthly. 0 1
Solution Key 6/21/2010 6 of 8
MGSC 1205 ****Final Exam**** Winter 2008
a) How much interest will you earn from this deposit after 2 years?
n = 24
t =2 24
0.045 0.045
2 pts r = 0.045 i= I = F − P = 200 1 + − 200 = 218 .80 − 200 = 18 .80
m =12
12 12
P = 200
b) How long does it take for the deposit to be $300 in this account? (Interest is 4.5% compounded monthly)
log( 1.5)
n= = 108 .327
300 = 200 (1 +i )
n
0.045
log( 1 + )
2 pts 1.5 = (1 +i )
n
12
log( 1.5) = n log( 1 +i ) 108 .327
t= = 9.027 years
12
c) How much will you have after 2 years if, after the initial deposit of $200, you also deposit $500 at the end of year 1?
12
0.045
2 pts F1 + F2 = 218 .80 + 500 1 + = 218 .80 + 522 .97 = 741 .77
12
#9. Nina wants to open a saving account in a bank. She is facing two options: one saving account offers interest of
7.5% compounded quarterly; the other offers interest of 7.75% compounded annually. Which account should Nina
choose?
4
0.075
2 pts reff = 1 + − 1 = 7.7136 % < 7.75%
4
#10. Suppose you opened an account today with a deposit $1000. If you save $500 at the end of each month for 2
years at the interest of 6% compounded monthly. How much will be in the account at the end of the second year?
t =2 n = 24
P1 = 1000
r = 0.06 0.06
i= = 0.005 R = 500
m =12 12
#11. Peter’s parents established a 4-year term trust fund from which Peter can withdraw $800 every month. If they also
want to have a $5000 balance in the account after 4 years, how large should the trust fund be if the interest is
5.5% compounded monthly?
t =4 n = 48
F1 = 5000
r = 0.055 0.055
i= = 0.004583 R = 800
m =12 12
−48
0.055
−48 1 − 1 +
3 pts 0.055 12
P1 + P2 = 5000 1 + + 800 = 4014 .61 + 34,399 .02 = 38,413 .63
12 0.055
12
#12. Chris purchased a condominium recently. He took out a mortgage of $175,000. The interest rate for such a
mortgage amortized over a 20-year period is at 6.75% interest compounded monthly.
a) What is Chris’ monthly payment?
0.0675
R= 12 (175 ,000 ) = 1330 .64
−240
0.0675
1 − 1 +
12
b) In Chris’ first payment, how much is towards interest, and how much is applied against the principal of the
mortgage?
2 pts Interest in the 1st month = P × i = 175,000 × 0.00575 = 984.38
Amount against principal = R – Interest = 1330.64 – 984.38 = 346.27
c) How much interest will Chris pay over the 20-year life of the loan?
= 319,352.88 – 175,000
= 144,352.88
d) What will the balance of the mortgage be after 15 years?
−60
0.00675
1 − 1 +
P = 1330 .64 12 = 67 ,601 .93
0.00675
12
#13. a) Use the information given below to construct an amortization table for the first 3 monthly payments.
4 pts
J K L M N O
6 Mortgage Loan Amortization Table
7 Interest rate 6% Monthly
8 Monthly rate 0.5% Payment $100
9 Initial principal $5,000
10 Initial Amount against New
11 Month Balance Payment Interest Princpal Balance
12 1 5,000.00 100.00 25.00 75.00 4,925.00
13 2 4,925.00 100.00 24.63 75.38 4,849.63
14 3 4,849.63 100.00 24.25 75.75 4,773.87
b) When you setup the amortization table in Excel, formulas could be used in cells K12:O12, & K13, and then,
cells L12:O12 could be copied to L13:O13, and finally cells K13:O13 could be copied to all the remaining
rows. Fill in the following blanks with the formulas needed in calculation.
3 pts
K12 = K9 N12 = L12 – M12
L12 = $M$8 O12 = K12 – N12
M12 = K12*$K$8 K13 = O12