An investor has $80,000 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 $9,000 , 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?

Question

Ricardo Gutierrez

Mathematics

18 May, 08:14

An investor has $80,000 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 $9,000 , 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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Answers (1)

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Silas Dudley · Answer 1

mutual fund: $9000 CDs: $71000 return: $6220, an average of 7.775%

Step-by-step explanation:

Since the mutual fund is the lower yield vehicle, only the minimum should be invested there.

The investments and returns should be ...

mutual fund: $9000, return = 6% * $9000 = $540

CD: $71000, return = 8% * $71000 = $5680

The maximum return is ...

$540 + 5680 = $6220