An investor has $24,000 to invest in bonds of AAA and B qualities. The AAA bonds yield an average of 6% and the B bonds yield 10%. The investor requires that at least three times as much money should be invested in AAA bonds as in B bonds. How much should be invested in each type of bond to maximize the return? What is the maximum return?
An investor has $24,000 to invest in bonds of AAA and B qualities. The AAA bonds yield an average of 6% and the B bonds yield 10%. The investor requires that at least three times as much money should be invested in AAA bonds as in B bonds. How much should be invested in each type of bond to maximize the return? What is the maximum return?
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.6P
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An investor has $24,000 to invest in bonds of AAA and B qualities. The AAA bonds yield an average of 6% and the B bonds yield 10%. The investor requires that at least three times as much money should be invested in AAA bonds as in B bonds.
How much should be invested in each type of bond to maximize the return? What is the maximum return?
- Define the variables needed to solve this problem.
- Organize your given information. (This part NOT graded, but encouraged.)
- Write the complete linear programming problem, which includes the objective function and all constraints.
- Graph and make sure all lines are labeled and shaded/solution region is clear and easy to identify.
- Create a corner point chart. Remember to mark your solution.
- Answer in a complete sentence or two:
- How much should be invested in each type of bond to maximize the return?
- What is the maximum return?
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