An individual investor has birr 90,000 to divide among several investments.
The alternative investments are municipal bonds with an 9.5 % return, certificates of deposits with a 10% return, treasury bill with a 7.5 % return,
I'd say go with the highest yield.
Was there something in particular you wanted to ascertain?
To determine how to divide the birr 90,000 among the alternative investments, you need to consider the returns on each investment option.
First, calculate the return on investment for each option.
For municipal bonds with a 9.5% return:
Return on investment = 9.5% of birr 90,000
= 0.095 * 90,000
= birr 8,550
For certificates of deposit with a 10% return:
Return on investment = 10% of birr 90,000
= 0.10 * 90,000
= birr 9,000
For treasury bills with a 7.5% return:
Return on investment = 7.5% of birr 90,000
= 0.075 * 90,000
= birr 6,750
Now, you can compare the returns for each option.
birr 8,550 from municipal bonds,
birr 9,000 from certificates of deposit, and
birr 6,750 from treasury bills.
You can allocate the investments based on the desired return and your risk tolerance. For example, if you prefer a higher return with a higher risk, you might allocate a larger portion to certificates of deposit. If you prefer a more conservative approach, you might allocate more to municipal bonds.
Keep in mind that diversifying your investments can help spread out your risk. You can divide the birr 90,000 into different portions for each investment option, such as birr 30,000 for municipal bonds, birr 40,000 for certificates of deposit, and birr 20,000 for treasury bills. Adjust these proportions according to your own preferences and risk tolerance.