Math

posted by .

Deborah inherited a large sum of money; she wants to use a portion of this money to set up a trust fund for her two children. The trust fund has two investment options: 1) a bond fund and 2) a stock fund. The projected returns over the life of the investments are 6% for the bond fund and 10% for the stock fund. Whatever portion of the inheritance she finally decides to commit to the trust fund, she wants to invest at least 30% of the amount in the bond fund. In addition, she wants to select a mix that will enable her to obtain a total return of at least 7.5%.

  • Math -

    Let
    b=fraction of investments for bonds,
    1-b=fraction of investments for stocks.
    we require b>0.3:
    Thus
    b*0.06+(1-b)*0.1=0.075

    Solve the equation for the maximum value of b. Also make sure that b>0.3,
    (answer is 0.3≤ b ≤5/8)

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. MSIS Management Science Methods

    How can I set this question up in Lindo? Client has 800,000 that must be invested in 3 funds. 20 to 40% invested in growth fund, 20 to 50% in income fund and at least 30% in money market fund. Client has a max risk index of 0.05. Risk
  2. Stats

    G. Johnson recently inherited a large sum o money; he wants to use a portion of this money to set up a trust fund for his two children. The trust fund has two investment options: 1) a bond fund and 2) a stock fund. The projected returns …
  3. Math

    How do I formulate this question to be solved in the POM-QM software?
  4. Statistics

    You have received a year-end bonus of $5000. You decide to invest the money in the stock market and have narrowed your investment options down to two mutual funds. the following data represent the historical quarterly rates of return …
  5. accounting

    A bond sinking fund investment is started on January 5, 2010, by transferring $10,000 in cash to the fund. This $10,000 is invested and earns $1,100 during 2010. The entry to record the earnings made on the sinking fund investment …
  6. accounting

    A bond sinking fund investment is started on January 5, 2010, by transferring $10,000 in cash to the fund. This $10,000 is invested and earns $1,100 during 2010. The entry to record the earnings made on the sinking fund investment …
  7. Finance

    Your client has been given a trust fund valued at $1 million. She cannot access the money until she turns 68 years old, which is in 12 years. At that time, she can withdraw $30,000 per month. If the trust fund is invested at a 7 percent …
  8. Math

    A deposit of $10,000 is made in a trust fund that pays 4.9% interest, compounded monthly. What is the balance of the trust fund after 15 years?
  9. math

    William recently inherited a large sum of money; he wants to use a portion of this money to set up a trust fund for his two children. The trust fund has two investment options: (1) a bond fund and (2) a stock fund. The projected returns …
  10. Math generating functions

    at present, there is one-hundred thousand in a trust fund. The fund earns two % interest per year, but ten% of the fund is given away each year. Also, ten-thousand is put into the trust fund per year. 1a) Obtain and solve the difference …

More Similar Questions