A financier plans to invest up to $950,000 in two projects, Project A yields a r

Question

A financier plans to invest up to $950,000 in two projects, Project A yields a return of 10% on the investment, whereas Project B yields a return of 15% on the investment Because the investment in Project B is riskier than the investment in Project A, the financier has decided that the investment in Project B should not exceed 40% of the tot investment. How much should she invest in each project to maximize the return on her investment? Project A Project B $ What is the maximum return?

Explanation / Answer

Dear Student Thank you for using Chegg !! Let the investment in project B be x $ then investment in project A is 950000- x $ Now total return = 10% of investment in A + 15% of investment in B = 0.1 (950000-x ) + 0.15x =95000 + 0.05x Now to maximize return investment on project B is to be increased But considering rink in investment it has been limited to 40% Investment in B = 40% of 950000 380000 $ => x is 380000 $ Investment in A = 950000 - (Investment in A) 570000 $ Maximum return = =95000 + 0.05x 95000 + 0.05 (380000) 114000 Solution

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