152k views
5 votes
Suppose the investor decides to increase the maximum invested in high-risk bonds to $ 3000 but leaves the other conditions unchanged. By how much will her maximum possible interest yield increase?

1 Answer

1 vote

Final answer:

When the maximum investment in high-risk bonds is increased to $3000, the maximum possible interest yield will increase by $360.

Step-by-step explanation:

When the investor increases the maximum invested in high-risk bonds to $3000, the maximum possible interest yield will also increase. To calculate the increase in yield, we need to consider the yield on the bond. Using the given information in the question, the yield on the bond is 12%. This means that if the investor invests $964 in an alternative investment, they will receive $1080 a year from now. Therefore, the investor will not pay more than $964 for the original $1000 bond. Since the maximum investment is increased to $3000, the maximum possible interest yield will increase by 12% of $3000, which is $360.

User Aditya Heartly
by
8.3k points