A pension fund manager decides to invest a total of at most $30 million in U.S. Treasury bonds paying 4% annual interest and in mutual funds paying 8% annual interest. The fund manager plans to invest at least $5 million in bonds and at least $10 million in mutual funds. Bonds have an initial fee of $100 per million dollars, while the fee for mutual funds is $200 per million. The fund manager is allowed to spend no more than $5000 on fees. How much should be invested in each to maximize annual interest? What is the maximum annual interest?
A pension fund manager decides to invest a total of at most $30 million in U.S. Treasury bonds paying 4% annual interest and in mutual funds paying 8% annual interest. The fund manager plans to invest at least $5 million in bonds and at least $10 million in mutual funds. Bonds have an initial fee of $100 per million dollars, while the fee for mutual funds is $200 per million. The fund manager is allowed to spend no more than $5000 on fees. How much should be invested in each to maximize annual interest? What is the maximum annual interest?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A pension fund manager decides to invest a total of
at most $30 million in U.S. Treasury bonds paying 4% annual
interest and in mutual funds paying 8% annual interest. The
fund manager plans to invest at least $5 million in bonds and at
least $10 million in mutual funds. Bonds have an initial fee of
$100 per million dollars, while the fee for mutual funds is
$200 per million. The fund manager is allowed to spend no
more than $5000 on fees. How much should be invested in
each to maximize annual interest? What is the maximum
annual interest?
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