Help A person plans to invest a total of $60,000 in a money market account, a bo

Question

Help A person plans to invest a total of $60,000 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 2 times the amount in international stocks. Finally, she needs an annual return of $2,500. 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?

Explanation / Answer

given money market + bonds investment = 36000;

international fund and domestic funds = 24000;

further;

0.025x+0.035(36000-x) + 0.04y+0.06(24000-y) = 2500;

0.01x+0.02y= 200;

x+2y = 20000;

we can choose x and y suitably such that above equation holds good;

such as x=10,000 and y = 5000;

so we get;

money market = 10,000;

bonds = 26000;

international stock = 5000;

and domestic stock = 19000

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