A private investment club has $200,000 earmarked for investment in stocks. To arrive at an acceptable overall level of risk, the stocks that management is considering have been classified into three categories: high risk, medium risk, and low risk. Management estimates that high-risk stocks will have a rate of return of 15%/year; medium-risk stocks, 10%/year; and low-risk stocks, 6%/year. The members have decided that the investment in low-risk stocks should be equal to the sum of the investments in the stocks of the other two categories. Determine how much the club should invest in each type of stock if the investment goal is to have a return of $20,000/year on the total investment. (Assume that all the money available for investment is invested.) Note: Develop the linear system of equations from the above theory and solve the system by Gauss Jordon Method.

A private investment club has $200,000 earmarked for investment in stocks. To arrive at an acceptable overall level of risk, the stocks that management is considering have been classified into three categories: high risk, medium risk, and low risk. Management estimates that high-risk stocks will have a rate of return of 15%/year; medium-risk stocks, 10%/year; and low-risk stocks, 6%/year. The members have decided that the investment in low-risk stocks should be equal to the sum of the investments in the stocks of the other two categories. Determine how much the club should invest in each type of stock if the investment goal is to have a return of $20,000/year on the total investment. (Assume that all the money available for investment is invested.) Note: Develop the linear system of equations from the above theory and solve the system by Gauss Jordon Method.

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 8DTM

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