A financier plans to invest up to $600,000 in two projects. Project A yields a return of 10% on the investment, whereas project B yields a return of 13% on the investment. Because the investment in project B is riskier than the investment in project A, she has decided that the investment in project B should not exceed 35% of the total investment. How much should the financier invest in each project in order to maximize the return on her investment?
| project A | $ |
| project B | $ |
What is the maximum return?
$
The Total investment = $600,000
Project A Yield = 10%
Project B Yield = 13%
Maximum Percentage that Could be invested in B = 35%
The Yield of Project B is More than Project B So, In order to maximise the return we will invest in Project B at maximum level.
Project B Investment = 600,000 * 35%
= $210,000
Project A investment = Total Investment - Project B investment
= 600,000 - 210,000
= $390,000
The Maximum Return = Amount Invested in Project A * Yield rate + Amount Invested in Project B * Yield rate
= 210,000 * 10% + 390,000 * 13%
= 21000 + 50700
= $71700
So, The maximum return is $71,700
Get Answers For Free
Most questions answered within 1 hours.