A person plans to invest a total of $270,000 in a money market account, a bond f

Question

A person plans to invest a total of $270,000 in a money market account, a bond fund, an international stock fund, and a domestic stock fund. She wants 60% of her investment to be conservative (money market and bonds). She wants the amount in domestic stocks to be 4 times the amount in international stocks. Finally, she needs an annual return of $10,800. Assuming she gets annual returns of 2.5% on the money market account, 3.5% on the bond fund, 4% on the international stock fund, and 6% on the domestic stock fund, how much should she put in each investment?

The amount that should be invested in the money market account is (Type a whole number.)

The amount that should be invested in the bond fund is (Type a whole number.)

The amount that should be invested in the international stock fund is (Type a whole number.)

The amount that should be invested in domestic stock fund is $

Explanation / Answer

Let the amount in domestic fund be D, amount in International fund be I, amount in bond fund be B and amount in money market fund be M

Annual return on money market account= 2.5%= 0.025

Annual return on bond fund= 3.5%= 0.035

Annual return on international stock fund= 4%= 0.04

Annual return on domestic stock fund= 6%= 0.06

As per the question,

M+B=162000

Therefore

I+D=108000

Also, D=4I

5I=108000

I=$21600@0.04=$864

D=4I=4*21600=$86400@0.06=$5184

It is given,

0.025M+0.035B+0.04I+0.06D=10800

0.025M+0.035B=10800-(5184+864)

0.025M+0.035B=4752

Also M+B=162000

Now

M+B=162000

and

(0.025M+0.035B=4752), multiply by 40, we get M+1.4B=190080

Solving both the equations we get

B=$70200@0.035=$2457

M+B=162000

M=$91800@0.025=$2295

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.