Question

Shoemacher has $20,000 to invest in two types of mutual funds: a High-Yield Fund and an Equity Fund. The High-Yield fund has an annual yield of 12%, while the Equity fund earns 8%. He would like to invest at least $3000 in the High-Yield fund and at least $4000 in the Equity fund. How much should he invest in each to maximize his annual yield, and what is the maximum yield?

Answer 1

you have to maximize the following equation: 0.12A + 0.08B

Where A is the amount of money invested in the high yield fund

Where B is the amount of money invested in the equity fund

A + B = 20,000

A ≥ 3,000

B ≥ 4,000

Using Solver, the optimal solution is to invest $16,000 in A and $4,000 in B. Maximum annual yield = $2,240