The National Credit Union has $250,000 available to invest in a12-month commitme
ID: 2444362 • Letter: T
Question
The National Credit Union has $250,000 available to invest in a12-month commitment. The money can be placed in Treasury notesyielding an 8% return or in municipal bonds at an average rate ofreturn of 7%. Credit union regulations require diversification tothe extent that at least 50% of the investment be placed inTreasury notes. Because of defaults in such municipalities asCleveland and New York, it is decided that no more than 40% of theinvestment be placed in bonds.
How much should the National Credit Union invest in Treasury notesso as to maximize its return on investment?
Round your answer to the nearest whole number; forexample, 123,456 .
How much should the National Credit Union invest in municipal bondsso as to maximize its return on investment?
Round your answer to the nearest whole number; forexample, 123,456 .
What is the maximal return on investment?
$
Round your answer to the nearest whole number; forexample, 12,345 .
The National Credit Union has $250,000 available to invest in a12-month commitment. The money can be placed in Treasury notesyielding an 8% return or in municipal bonds at an average rate ofreturn of 7%. Credit union regulations require diversification tothe extent that at least 50% of the investment be placed inTreasury notes. Because of defaults in such municipalities asCleveland and New York, it is decided that no more than 40% of theinvestment be placed in bonds.
(a)How much should the National Credit Union invest in Treasury notesso as to maximize its return on investment?
Round your answer to the nearest whole number; forexample, 123,456 .
(b)How much should the National Credit Union invest in municipal bondsso as to maximize its return on investment?
Round your answer to the nearest whole number; forexample, 123,456 .
(c)What is the maximal return on investment?
$
Round your answer to the nearest whole number; forexample, 12,345 .
Explanation / Answer
We want to maximize the return on investment. Sincetreasuries have the highest yield, we want to maximize the amountof treasuries we own. Return = T * .08 + M * .7 Constraints: T >= 50% MRelated Questions
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