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24 February, 08:14

A financier plans to invest up to $500,000 in two projects. Project A yields a return of 9% on the investment of x dollars, whereas Project B yields a return of 17% on the investment of y dollars. Because the investment in Project B is riskier than the investment in Project A, she has decided that the investment in Project B should not exceed 40% of the total investment. How much should the financier invest in each project in order to maximize the return on her investment

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  1. 24 February, 11:02
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    She should invest $300,000 in Project A, and $200,000 in Project B.

    Explanation:

    Solution

    Since Project B yields a higher return, she should invest as much money as possible in it, which is 40% of the total investment or

    or (0.40) ($500,000) = $200,000

    so

    The remaining $500,000 - $200,000 = $300,000 should be invested in Project A.

    Therefore, she should invest $300,000 in Project A, and $200,000 in Project B.
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