Problema Solution
An investor has $24,000 to invest in AAA and B Bonds. The AAA bonds pay 6% and B bonds pau 10% The investor wants to have at least three times as much money in the AAA bonds as in the B Bonds. How much should be invested in each type of bond to maximze the return? What is thr Maximum return?
Answer provided by our tutors
let
x = the money invested in AAA bonds, x=> 0
y = the money invested in B bonds, y =>0
an investor has $24,000 to invest in AAA and B Bonds
x + y <= 24000
the investor wants to have at least three times as much money in the AAA bonds as in the B Bonds
x => 3y
we will define the return by
F(x , y) = 0.06x + 0.10*y (the objective function)
lets draw the graph of the system of inequalities (constrains) and determine the corner points
x=> 0
y => 0
x + y <= 24000
x =< 3y
click here to see the graph
there are 3 corner points and we calculate F(x ,y) for each point to find the maximum value (the biggest value for F):
(0, 0) => F(x , y) = $0
(24000, 0) => F(24000, 0) = 0.06*24000 = $1440
by solving the system we find the third corner point
x = 3y
x + y = 24000
click here to see the step by step solution of the system of equations
x = 18000
y = 6000
F(18000, 6000) = 0.06*18000 + 0.10*6000 = $1680 this is the maximum return
To maximize the return $18,000 should be invested in AAA bonds and $6,000 in B bonds.
The maximum return equals $1,680.