An investor has at most $10,000 to invest in government bonds, mutual funds, and

Question

An investor has at most $10,000 to invest in government bonds, mutual funds, and money market funds. The average yields for the government bonds, mutual funds, and money market funds are 2%, 8%, and 5% respectively. the investor's policy requires that the total amount invested in mutual funds and money market funds not exceed the amount invested in government bonds. How much should be invested in each type of investment in order to maximize the return? What is the maximum return in the first year? Please show work.

Explanation / Answer

gov bonds = 7% = .07 mut funds = 9% = .09 = x mon mark = 3% = .03 = y so... 20000*.07 + .09x + .03y = return x + y = 20000 .09x + .03y = 1400 so... 9x + 3y = 140000 3x + 3y = 60000 subtract 6x = 80000 x = $13333.33 and y = $6666.67 ans: How much should be invested in government bonds? $20000. How much should be invested in mutual bonds? $13333.33 How much should be invested in money market funds? $6666.67 20000*.07 + 13333.33 * .09 + 6666.67 * .03 = 1400 + 1200 + 200 = 2800 What is the maximum return in the first year? $2800.00

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