Posted by **Nica** on Saturday, September 17, 2011 at 12:10pm.

A winner of the Florida Lotto has decided to

invest $500,000 per year. Two possible

considerations are an international stock with an

estimated return of 12% and a mutual fund with an

estimated return of 6%. The estimated risk index for

the international fund is 9 while the mutual fund

risk index is only 4. The total risk of the portfolio is

found by multiplying the risk of each account by the

dollars invested in that option. The investor would

like to maximize the return on the investment, but

the average risk index of the portfolio should not be

higher than 6 based on the estimated retirement

date. How much should be invested in each option?

What is the average risk for this investment? What

is the estimated return for the investment?

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