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.
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Answers & Comments
B bonds = X
AAA bonds = 3X
ADD 4X = $24,000
X = $6000
$6000 ( B bonds ) + $18000 ( AAA bonds)
Return = $ 600 + $ 1080 = $1680 ANSWER
just invest the minimum stipulated so that AAA:B = 3:1
thus $18,000 in AAA , $6,000 in B
max return = .06*18000 + .1*6000 = $1680 <-------