Question

An investor has $12,000 to invest into two different funds. Fund A, which is a high risk fund, yields an average return of 14%. Fund B, which is a low risk fund, yields an average return of 6%. To reduce the risk, the investor wants the amount in fund B to be at least twice the amount in fund A. How much should be invested in each fund to maximize the return?

Answer 1

By computing let be the variable X be the amount of Fund A and variable Y be the amount of Fund B.So fund b should be at least twice the amount of fund A it means that X =X +2Y and Y is still the same. So to calculate X+Y = 12000, first count all the variables present in the equation, its 4 so divide 12,000 to 4 you will come up with 3000. That is the value of A = 3000, the B is 3,000 plus twice the vale of A so the value of B is 9,000