An investor has up to $450,000 to invest in three types of investments. Type A pays 6% annually and has a
risk factor of 0. Type B pays 10% annually and has a risk factor of 0.06. Type C pays 12% annually and has a
risk factor of 0.08. To have a well‐balanced portfolio, the investor imposes the following conditions. The
average risk factor should be no greater than 0.05. Moreover, at least one‐half of the total portfolio is to be
allocated to type A investments and at least one‐fourth of the portfolio is to be allocated to type B
investments. How much should be allocated to each type of investment to obtain a
maximum return and what is the maximum return?
1 answer