A retired couple has up to $50,000 to place in fixed-income securities. Their financial adviser suggests two
Question:
A retired couple has up to $50,000 to place in fixed-income securities. Their financial adviser suggests two securities to them: one is an AAA bond that yields 8% per annum; the other is a certificate of deposit (CD) that yields 4%. After careful consideration of the alternatives, the couple decides to place at most $20,000 in the AAA bond and at least $15,000 in the CD. They also instruct the financial adviser to place at least as much in the CD as in the AAA bond. How should the financial adviser proceed to maximize the return on their investment?
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Let x the amount placed in the AAA bond Let y the amount placed in a CD The total return is R0...View the full answer
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