SOLUTION: A retired couple have RM30,000 to invest in a fixed-income security. Their broker recommends investing in two bonds: AAA bond yielding 8% and the other BBB bond paying 12%. After s

Question 1169803: A retired couple have RM30,000 to invest in a fixed-income security. Their broker recommends investing in two bonds: AAA bond yielding 8% and the other BBB bond paying 12%. After some consideration, the couple decide to invest at most RM12,000 and at least RM6000 in the BBB bond and AAA bond, respectively. They also want the amount invested in the AAA bond to exceed or equal to the amount invested in the BBB bond.
What should the broker recommend if the couple wants to maximize the return of their investment?
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
this can be solved logically without the use of special tools.

the rate of return on the triple b bonds is 12% and the rate of return on the triple a bonds is 8%.

it makes sense to buy as many triple b bonds as you can and as few triple a bonds as you can.

the most you can invest in the triple b bonds is 12,000 rm.

the least you can invest in the triple a bonds is 6,000 rm.

since you have to invest 30,000 rm, then you must invest 18,000 rm in triple a bonds because the most you can invest in triple b bonds is 12,000 rm

your maximum profit will be 12,000 * .12 + 18,000 * .08 = 2,880 rm.

the requirements of the problem are met.

those are:

no more than 12,000 rm invested in triple b bonds.
no less than 6,000 rm invested in triple a bonds.
amount invested in triple a bonds and triple b bonds must be equal to 30,000 rm.

your solution is that the the broker should recommend 12000 rm be placed in triple b bonds and 18000 be placed in triple a bonds.

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