Jorge has decided to invest at most $130,000 in securities in the form of corpor

Question

Jorge has decided to invest at most $130,000 in securities in the form of corporate stocks. He has classified his options into three groups of stocks: bluechip stocks that he assumes will yield a 10% return (dividends and capital appreciation) within a year, growth stocks that he assumes will yield a 15% return within a year, and speculative stocks that he assumes will yield a 20% return (mainly due to capital appreciation) within a year. Because of the relative risks involved in his investment, Jorge has further decided that no more than 30% of his investment should be in growth and speculative stocks and at least 50% of his investment should be in blue-chip and speculative stocks. Determine how much Jorge should invest in each group of stocks in the hope of maximizing the return on his investments.

bluechip   = $ growth    = $ speculative   = $

Explanation / Answer

let invest ment in blue chip = x and invest ment in growth is = y invest ment in speculative = z we Know that x+z>50%of 130,000 and z+ y0.7*130,000 now 1.1*x+1.15*y+(130,000-x-y)1.2 = return 2x- y = some constant maximise this difference to get maximum return

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