An investor has $80 comma 000 to invest in a CD and a mutual fund. The CD yields 8 % and the mutual fund yields 6 %. The mutual fund requires a minimum investment of $10 comma 000 , and the investor requires that at least twice as much should be invested in CDs as in the mutual fund. How much should be invested in CDs and how much in the mutual fund to maximize the return? What is the maximum return?

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Business

Kailee Burns

16 August, 12:47

An investor has $80 comma 000 to invest in a CD and a mutual fund. The CD yields 8 % and the mutual fund yields 6 %. The mutual fund requires a minimum investment of $10 comma 000 , and the investor requires that at least twice as much should be invested in CDs as in the mutual fund. How much should be invested in CDs and how much in the mutual fund to maximize the return? What is the maximum return?

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Elaine · Answer 1

CD $ 70,000

Mutual fund $ 10,000

maximum return $ 6,200

Explanation:

we want to maximize return considering the following restrain

mutual fund > 10,000

certificate of deposit = > 2mutual fund

CD + Mutual Fund = 80,000

as the certificate yield is higher than mutual we will invest the minimum in mutual and the rest in the CD which will fullfil the requirement of at least twice as much invested in CD.

return = CD x 0.08 + mutual x 0.06

return = (80,000 - 10,000) x 0.08 + 10,000 x 0.06

return = 5,600 + 600 = 6,200