An investor has exist75000 to invest in a CD and a mutual fu

An investor has exist75,000 to invest in a CD and a mutual fund. The CD yields 6% and the mutual fund yields 8%. The mutual fund requires a minimum investment of exist8,000, and the investor requires that at least twice as much should be invested in CDs as in the mutual fund. How much should be invested in CDs and how much in the mutual fund to maximize the return? What is the maximum return?

Solution

Let $x be invested in CD and $y be invested in mutual fund

So, x+y=75000 and x = 2y

by solving we get x = $50000 and y = $25000

Return = (0.06*50000+0.08*25000)/75000 = 6.67% ( two decimal places)

So, maximum return is 6.67%