I need help solving annual return. Blair&Rosen;, Inc. (B&R;) is a brokerage firm

Question

I need help solving annual return.

Blair&Rosen;, Inc. (B&R;) is a brokerage firm that specializes in investment portfollios designed to meet the specific risk tolerances of its clients. A client who contacted B&R; this past week has a maximum of $50,000 to invest. B&R;'s investment advisor decides to recommend a portfolio consisting of two investment funds an nternet und and a Blue Chip fun. The internet und has a ro ected annual e mo % while the Blue Chip fund has a projected annual return of 7%. The investment advisor requires that at most $35,000 o the client's funds should be invested in the Internet fund. B&R; services include a nsk rating for each investment alternative. The Internet fund, which is the more risky of the two investment alternatives, has a risk rating of 5 per thousand dollars invested. The Blue Chip fund has a risk rating of 5 per thousand dollars invested. For example, if $10,000 is invested in each of the two investment funds, B&R;'s risk rating for the portfolio would be 5 10 + 5 10 = 100 Finally, B&R; developed a questionnaire to measure each client's risk tolerance. Based on the responses, each client is classified as a conservative, moderate, or aggressive investor. Suppose that the questionnaire results classified the current client as a moderate investor. B&R; recommends that a client who is a moderate investor limit his or her portfolio to a maximum risk rating of 240.

Explanation / Answer

Here we need to maximize the annual return with given constraints

Return = 14%x + 7%y

where x and y is the amount invested in internet and blue chip fund

Annual return = 14%*30000 + 7%*0

= 4200

Annual return = $4200

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