14. 1/3 points | Previous Answers TanFin11 2.1.038. My No Formulate but do not s

Question

14. 1/3 points | Previous Answers TanFin11 2.1.038. My No Formulate but do not solve the problem. The management of a private investment club has a fund of $150,000 earmarked for investment in stocks. To arrive at an acceptable overall level of risk, the stocks that management is considering have been classified into three categories: high-risk, medium-risk, and low-risk. Management estimates that high-risk stocks will have a rate of return of 16%/year; medium-risk stocks, 11%/year; and low-risk stocks, 6%/year. The investment in low-risk stocks is to be twice the sum of the investments in stocks of the other two categories. If the investment goal is to have an average rate of return of 9%/year on the total investment, determine how much the club should invest in each type of stock. (Assume that all the money available for investment is invested. Let x, y, and z denote the amount, in dollars, invested in high-, medium-, and low-risk stocks, respectively.) x + y + z ? -150,000 .09 (150,000) Need Help?Read ItWatch ItMaster Talk to a Tutor

Explanation / Answer

Given:

x = amount invested in high risk stock

y = amount invested in medium risk stock

z = amount invested in low risk stocks

Hence you have your system of equations:

x + y + z = 150,000

2(x + y) = z

0.16x + 0.11y + 0.06z = 0.09(150,000)

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