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An investor wishes to invest some of all his 12.5 million in a diversified portfolio through a commercial lender. The types of investments, the expected
An investor wishes to invest some of all his 12.5 million in a diversified portfolio through a commercial lender. The types of investments, the expected interest per year, and the maximum allowed percentage investment he will consider are shown the following table. He wants at least 35% of his investment to be nonmortgage instruments and no more than 60% to be in high-yield (and high-risk) instruments (i.e., expected interest >8%). How should his investment be diversified to make the most interest income?
INVESTMENT | EXPECTED INTEREST | Maximun ALLOWED |
Low-income mortgage | 7.00% | 20% |
Conventional mortgage Loans | 6.25% | 40% |
Government sponsored mortgage loans | 8.25% | 25% |
Bond Investments | 5.75% | 12% |
Stock investments | 8.75% | 15% |
Futures trading | 9.50% | 10% |
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