Question

Investment Risk & Return – A private investment club has a fund of 200,000 to invest in stocks. The

stocks being considered have been classified into three categories:

a. High Risk

b. Medium Risk

c. Low Risk

The following rate of return per year can be expected:

a. High Risk – 15%

b. Medium Risk – 10%

c. Low Risk – 5%

The amount invested in Low Risk is to be two times the sum of the amount invested in Medium Risk

and High Risk Stocks combined.

If the investment goal is to have an average rate of return of 9% per year on the total amount

invested, determine how much the club should invest in each type of stock.

Answer 1