An Investment Example Model Summary (1 of 5) An investor has $70,000 to divide a

Question

An Investment Example Model Summary (1 of 5) An investor has $70,000 to divide among several instruments. Municipal bonds have an 8.5% return, CD's a 5% return, t-bills a 6.5% return, and growth stock 13%. The following guidelines have been established: I. No more than 20% in municipal bonds 2. Investment in CDs should not exceed the other three alternatives 3. At least 30% invested in treasury bills and CDs 4. More should be invested in CDs and treasury bills than in municipal bonds and growth stocks by a ratio of 1.2 to 1 5. All $70,000 should be invested Watch "Ch4 Slide 11 12 (p122 124) Investment Example" video clip

Explanation / Answer

If the constraints on RHS is reduced to 60,000, still the amount invested in Municipal bonds remain 0 as the allowable decrease is 31500.

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