Q1. An investment company makes two types of loan: Industrial loan at 15% interest rate per year, and residential loan at 10% interest rate per year. The company can lend a maximum of Kshs. 10 million. For safety, the company has the policy of investing not more than 60% of the total amount in industrial loans and not more than 80% in residential loans. The company wishes to maximize interest income. Determine the amount that should be invested in each type of loan. Find the solution by the Simplex table method. (10 marks)
Q2. (a) What is your concept of the term “management”? Discuss (5marks)
(b) Discuss the importance of management as resource in modern society. (5marks)
Q3. Describe the basic structure of a decision model by listing the sequence of seven steps. Formulate a business problem and analyze it by applying these steps. (10 marks)
Q4. A man plans to buy two types of stocks: A and B. He finds that:
(a) The anticipated dividend per year on stock A is 60% and that on B is 2%
(b) The anticipated increase in market value in one year is £1 per pound invested in stock A and £2 per pound invested in stock B.
He wishes : 1. To have at least £300 dividend income each yea.
2. To have at least £10,000 increase on his investment in one year.
Use the graphic method to determine the minimum that he will spend on each type of stock. (10marks)
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