A linear programming approach for selecting an optimal fixed deposit investment plan offered by selected Malaysia bank

Investment decisions are inextricably tied to financial management decisions. Many people fail to invest because they lack fundamental knowledge of investments. Worse, banks do not give manual guidance in selecting an optimal Fixed Deposit (FD) plan, prompting clients to invest in a single maturity, a poor investment decision. This research used a linear programming (LP) model to help investors choose an optimal FD investment plan based on tenure and annual return rate. Based on the annual return rate of each bank in Malaysia, two banks are used for the short-term investment plan, while three are used for the long-term investment plan. This study proposed three investment packages. Plan 1 requires at least 20% of the money in each short-term bank and no more than 20% in each long-term bank. Plan 2 allocates no more than 20% of the money to short-term and 20% to long-term banks. Meanwhile, Plan 3 requires 25% of funds to be invested in short-term and 75% in long-term banks. To demonstrate this LP model, a computational experiment was conducted with RM50,000.00 of investment to see which plan gave the best result. Excel Solver Parameter Package was used to solve the investment problem. As a result, the investors are encouraged to invest in the third plan, which gives the investors an optimal maturity amount of RM52,067.19. More criteria for selecting an ideal investment plan can be included to further this study, and software to guide investors should be created.