Question

Carletta has $15,500 to invest. As her financial consultant, you recommend that she invest in Treasury Bills that yield 5%, Treasury Bonds that yield 6%, and corporate bonds that yield 7%, Carletta wants to have an annual income of $900, and the amount invested in corporate bonds must be half that invested in Treasury Bills. Find the amount she should place in each investment.

Carletta should invest $_____?_____ in Treasury Bills, $______?______ in Treasury Bonds, and $_______?_____ in corporate bonds to attain $900 annual income.

Answer 1

Let Amount invested in Treasury bills = x

Amount invested in Corporate bonds = x/2 = 0.5x

Amount invested in Treasury bonds = $15,500 - x - 0.5 x= $15,500 - 1.5x

Amount required to yeild = $900

[x * 5%] + [0.5x * 7%] + [($15,500 - 1.5x)*6%] = $900

0.05x + 0.035x + $930 - 0.09x = $900

0.005x = $30

x = $6,000

Amount invested in Treasury bills = $6,000

Amount invested in Corporate bonds = $6,000 / 2 = $3,000

Amount investdd in Treasury bonds = $15,500 - (1.5 * $6,000) = $6,500

Carletta should invest $6,000 in Treasury Bills, $6,500 in Treasury Bonds, and $3,000 in corporate bonds to attain $900 annual income.