an investor has at most $60,000.00 to invest in goverment bonds,mutual funds,and

Question

an investor has at most $60,000.00 to invest in goverment bonds,mutual funds,and money market funds. The average yields for goverment bonds mutual funds and money markets are 4%,13%,and 6% respectively.The investors policy requires that the total amount invested in mutual funds not exceed the amount invested in goverment bonds.How much should be invested in each type of investment in order to maximize the return.What is the maxium return in the first year. How much should be invested in goverment bonds

Explanation / Answer

Average of government bonds and mutual bonds is greater than money markets. And as such no restriction is laid on money markets funds so investing in money market funds is pointless. In order to maximize the return he should invest 50% in government bonds and 50% in mutual funds. Maximum return is $5,100.00. His investment should be 50% in government bonds.

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