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An investment broker wants to invest up to dollar-sign 28 comma 000 point She can invest in two mutual funds based on their yearly average return for the 5 years ending December 31, 2009: the Franklin Natural Resources fund yielding 7 % and the Oppenheimer Developing Markets A fund yielding 13 % Baseline Number . She wants to invest at least dollar-sign 7000 in the Franklin Natural Resources fund and no more than dollar-sign 11,000 in the Oppenheimer Developing Markets A fund. How much should she invest in each type of fund to maximize her return?

Respuesta :

jepessoa

Answer:

$2,970

Explanation:

An investor has $28,000 to invest between two funds:

  1. Franklin Natural Resources = yields 7%
  2. Oppenheimer Developing Markets = 13%

If she wants to maximize her returns, then she should invest as much as possible in the second fund. She is willing to invest:

  1. at least $7,000 in Franklin
  2. at most $11,000 in Oppenheimer

let F = amount invested in Franklin

let O = amount invested in Oppenheimer

F + O = 33,000

F ≥ 7,000

O ≥ 11,000

MAX return = 0.07F + 0.13O

O = 11,000 (yields higher return)

F + 11,000 = 33,000

F = 22,000

MAX return = 0.07(22,000) + 0.13(11,000) = $1,540 + $1,430 = $2,970

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