Question

1. An individual investor has $70,000 to divide among several investments. The alternative investments are municipal bonds with an 8.5% return, certificates of deposits with a 10% return, Treasury bill with a 6.5% return, and income bonds with a 13% return. The amount of time until maturity is the same for each alternative. However, each investment alternative has a different perceived risk to the investor; thus it is advisable to diversify. The investor wants to know how much to invest in each alternative in order to maximize the return. The following guidelines have been established for diversifying the investment and lessening the risk perceived by the investor.
No more than 20% of the total investment should be in an income bonds.
The amount invested in certificates of deposit should not exceed the amount invested in other three alternatives.
At least 30% of the investment should be in treasury bills and certificates of deposits.
The ratio of the amount invested in municipal bonds to the amount invested in treasury bills should not exceed one to three.
2 / 2
The investor wants to invest the entire $ 70,000

Answer 1

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Answer 2

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Answer 5

An individual investor has $70,000 to divide among several investments. The alternative investments are municipal bonds with an 8.5% return, certificates of deposits with a 10% return, Treasury bill with a 6.5% return, and income bonds with a 13% return. The amount of time until maturity is the same for each alternative. However, each investment alternative has a different perceived risk to the investor; thus it is advisable to diversify. The investor wants to know how much to invest in each alternative in order to maximize the return. The following guidelines have been established for diversifying the investment and lessening the risk perceived by the investor.
No more than 20% of the total investment should be in an income bonds.
The amount invested in certificates of deposit should not exceed the amount invested in other three alternatives.
At least 30% of the investment should be in treasury bills and certificates of deposits.
The ratio of the amount invested in municipal bonds to the amount invested in treasury bills should not exceed one to three.
2 / 2
The investor wants to invest the entire $ 70,000