The National Credit Union has $250,000available to invest in a 12-month commitme
ID: 2444498 • Letter: T
Question
The National Credit Union has $250,000available to invest in a 12-month commitment. The money can beplaced in Treasury notes yielding an 5% return or in municipalbonds at an average rate of return of 9%. Credit union regulationsrequire diversification to the extent that at least 50% of theinvestment be placed in Treasury notes. Because of defaults in suchmunicipalities as Cleveland and New York, it is decided that nomore than 40% of the investment be placed in bonds.
How much should the National Credit Unioninvest in Treasury notes so as to maximize its return oninvestment?
Round your answer to the nearest wholenumber; for example,123,456 .
How much should the National Credit Unioninvest in municipal bonds so as to maximize its return oninvestment?
Round your answer to the nearest wholenumber; for example,123,456 .
What is the maximal return oninvestment?
$
Round your answer to the nearest wholenumber; for example,12,345 .
The National Credit Union has $250,000available to invest in a 12-month commitment. The money can beplaced in Treasury notes yielding an 5% return or in municipalbonds at an average rate of return of 9%. Credit union regulationsrequire diversification to the extent that at least 50% of theinvestment be placed in Treasury notes. Because of defaults in suchmunicipalities as Cleveland and New York, it is decided that nomore than 40% of the investment be placed in bonds.
(a)How much should the National Credit Unioninvest in Treasury notes so as to maximize its return oninvestment?
Round your answer to the nearest wholenumber; for example,123,456 .
(b)How much should the National Credit Unioninvest in municipal bonds so as to maximize its return oninvestment?
Round your answer to the nearest wholenumber; for example,123,456 .
(c)What is the maximal return oninvestment?
$
Round your answer to the nearest wholenumber; for example,12,345 .
Explanation / Answer
so you have to have minimum of 50% in treasury and a maximumof 40% in bonds : a) to maximize return you would want the maximum of 40% inbonds(since bonds are paying the higher rate of return) sothat would leave 60% in treasury :.6(250000)=$150000 invested intreasury :
.6(250000)=$150000 invested intreasury : b)as stated above the maximum of 40%should be placed in bonds(higher rate of return so you want themaximum invested in bonds::
.4(250000)=$100000 invested in bonds : c) since we have a return of 5% on treasurynotes and 9% on bonds...multiply amount invested in treasuries by.05 and multiply amount invested in bonds by .09 and add these twotogether to get return on investment
150000(.05)+100000(.09)=$7500+$9000=$16500 : c) since we have a return of 5% on treasurynotes and 9% on bonds...multiply amount invested in treasuries by.05 and multiply amount invested in bonds by .09 and add these twotogether to get return on investment
150000(.05)+100000(.09)=$7500+$9000=$16500 : c) since we have a return of 5% on treasurynotes and 9% on bonds...multiply amount invested in treasuries by.05 and multiply amount invested in bonds by .09 and add these twotogether to get return on investment
150000(.05)+100000(.09)=$7500+$9000=$16500
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