SOLUTION: An investor has $10,000 to invest in three types of bonds: short term, medium term and long term bonds. Short term bonds have a return of 4% anually, medium bonds have a return of
Question 173808: An investor has $10,000 to invest in three types of bonds: short term, medium term and long term bonds. Short term bonds have a return of 4% anually, medium bonds have a return of 5% anually and long term bonds have a return of 6% anually. The investor wants a anual return of 5.1% with equal investments in short and medium term bonds. How much does he have to invest in long term bonds? Answer by josmiceli(19441) (Show Source):
You can put this solution on YOUR website! Let = amount invested in short-term
Let = amount invested in medium term
Let = amount invested in long yerm
Given is: = annual return on short-terms = annual return on medium-terms = annual return on long-terms
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The problem is looking for an overall return
of 5.1% on these 3 investments, so, in words
(sum of the returns)/(total investment) = 5.1%
Multiply both sides by
(1)
Multiply both sides by
(1)
(2) (given)
Multiply both sides of (2) by
(2)
Subtract (1) from (2)
And, since ,
He has to invest $4000 in long-term bonds
check answer:
OK
