Please explain your answer The National Credit Union has $250,000 available to i

Question

Please explain your answer

The National Credit Union has $250,000 available to invest in a12-month commitment. The money can be placed in Treasury notesyielding an 8% return or in municipal bonds at an average rate ofreturn of 9%. Credit union regulations require diversification tothe extent that at least 50% of the investment be placed inTreasury notes. Because of defaults in such municipalities asCleveland and New York, it is decided that no more than 40% of theinvestment be placed in bonds.

How much should the National Credit Union invest in Treasury notesso as to maximize its return on investment?

Round your answer to the nearest whole number; forexample, 123,456 .

How much should the National Credit Union invest in municipal bondsso as to maximize its return on investment?

Round your answer to the nearest whole number; forexample, 123,456 .

What is the maximal return on investment?

$

Round your answer to the nearest whole number; forexample, 12,345 .

Please explain your answer

The National Credit Union has $250,000 available to invest in a12-month commitment. The money can be placed in Treasury notesyielding an 8% return or in municipal bonds at an average rate ofreturn of 9%. Credit union regulations require diversification tothe extent that at least 50% of the investment be placed inTreasury notes. Because of defaults in such municipalities asCleveland and New York, it is decided that no more than 40% of theinvestment be placed in bonds.

(a)

How much should the National Credit Union invest in Treasury notesso as to maximize its return on investment?

Round your answer to the nearest whole number; forexample, 123,456 .

(b)

How much should the National Credit Union invest in municipal bondsso as to maximize its return on investment?

Round your answer to the nearest whole number; forexample, 123,456 .

(c)

What is the maximal return on investment?

$

Round your answer to the nearest whole number; forexample, 12,345 .

Explanation / Answer

Since we want to maximize our return and the municipal bonds havethe highest return, we want to maximize our investment in municipalbonds. From the problem, we know that we cannot invest more than 40% ofour funds in municipal bonds. Thus, we will invest thismaximum of 40%. The remaining 60% we can invest intreasuries. This satisfies both requirements (T > 50%, M

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---