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.

Intermediate Algebra
19th Edition
ISBN:9780998625720
Author:Lynn Marecek
Publisher:Lynn Marecek
Chapter12: Sequences, Series And Binomial Theorem
Section12.3: Geometric Sequences And Series
Problem 12.58TI: What is the total effect on the economy of a government tax rebate of $500 to each household in...
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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.

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