An investment firm recommends that a client invest in bonds rated AAA, A, and B. The...

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An investment firm recommends that a client invest in bonds rated AAA, A, and B. The average yield on AAA bonds is 5%, on A b

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Answer 1

Answer #1

	Investment	Return	Return
AAA	2x	5%	0.1x
A	26000-3x	6%	1560-0.18x
B	x	9%	0.09x
	26000		1620.00

Let Investment in B= x
Therefore, investment in AAA= 2x
Remaining in A= 26000-x-2x=26000-3x

Solving the equation
0.1x+1560-0.18x+0.09x= 1620
1560+0.01x= 1620
x= $6000

The client should invest
AAA	$12,000
A	$8,000
B	$6,000

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Answer 2

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