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Banks, investment funds, and insurance companies often have to select specific investments from a variety of alternatives. Overall objective is generally to maximize the potential
Banks, investment funds, and insurance companies often have to select specific investments from a variety of alternatives. Overall objective is generally to maximize the potential return on the investment given a set of legal, policy, or risk restraints. Steve City Trust (SCT) invests in short-term trade credits, corporate bonds, gold stocks, and construction loans. The board of directors has placed limits on how much can be invested in each area. Investment Interest Earned (%) Max Investment ($ Millions) 1.0 11 2.5 Trade credit Corporate bonds Gold stocks Construction loans 19 1.5 15 SCT has $5 million to invest and wants to accomplish two goals: - Maximize the return on investment over the next six months - Satisfy the diversification requirements set by the board SCT has $5 million to invest and wants to accomplish two goals: - Maximize the return on investment over the next six months - Satisfy the diversification requirements set by the board The board has also decided that at least 55% of the funds must be invested in gold stocks and construction loans and no less than 15% be invested in trade credit The Solved problem should illustrate SCT should invest how much in each of the investments tools to accomplished the goals
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