An investor has $24,000 to invest in bonds of AAA and B qualities. The AAA bonds yield an average of 6% and the B bonds yield 10%. The investor requires that at least three times as much money should be invested in AAA bonds as in B bonds.How much should be invested in each type of bond to maximize the return? What is the maximum return?Define the variables needed to solve this problem.Organize your given information. (This part NOT graded, but encouraged.)Write the complete linear programming problem, which includes the objective function and all constraints.Graph and make sure all lines are labeled and shaded/solution region is clear and easy to identify.Create a corner point chart. Remember to mark your solution.Answer in a complete sentence or two: How much should be invested in each type of bond to maximize the return?What is the maximum return?

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Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 2MC

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An investor has $24,000 to invest in bonds of AAA and B qualities. The AAA bonds yield an average of 6% and the B bonds yield 10%. The investor requires that at least three times as much money should be invested in AAA bonds as in B bonds.

How much should be invested in each type of bond to maximize the return? What is the maximum return?

Define the variables needed to solve this problem.
Organize your given information. (This part NOT graded, but encouraged.)
Write the complete linear programming problem, which includes the objective function and all constraints.
Graph and make sure all lines are labeled and shaded/solution region is clear and easy to identify.
Create a corner point chart. Remember to mark your solution.
Answer in a complete sentence or two:
- How much should be invested in each type of bond to maximize the return?
- What is the maximum return?

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