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


Click to see all the steps



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


Click to see all the steps



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.