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15 March, 06:09

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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  1. 15 March, 06:31
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    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
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