An investor has at most $30,000 to invest in government bonds, mutual funds, and

Question

An investor has at most $30,000 to invest in government bonds, mutual funds, and money market funds. The average yields for the government bonds, mutual funds, and money market funds are 3% 8%, and 6% respectively. The investor's polcy requires that the total amount invested in mutual and money market funds not exceed the amount invested in government bonds. How much should be invested in each type of investment in order to maximize the return? What is the maximum return in the first year? How much should be invested in government bonds? How much should be invested in mutual funds? How much should be invested in money market funds? What is the maximum return in the first year? Enter your answer in each of the answer boxes

Explanation / Answer

gb + mf + mm = 30000

mf + mm < gb

As mutual fund gives high return, need to invest 50% in mutual funds and 50% in government bond . ( To satisfy above condition)

Which means investment in money market is zero.

a)

government bonds = 50%*30000 = 15000

b)

mutual funds = 50%*30000 = 15000

c)

money market = 0%*30000 = 0

d)

Maximum return = 15000*3% + 15000*8% = 1650

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