Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 1 (10 points) Listen The National Credit Union has $500,000 available to invest in a 12-month commitment. The money can be placed in

image text in transcribed

Question 1 (10 points) Listen The National Credit Union has $500,000 available to invest in a 12-month commitment. The money can be placed in Treasury notes yielding an 4% return, in municipal bonds at an average rate of return of 5%, or in corporate bonds yielding an 6.5% average return. Credit union regulations require diversification to the extent that at least 50% of the investment be placed in Treasury notes. Because of defaults in such municipalities as Cleveland and New York, it is decided that no more than 30% of the investment be placed in bonds. Total amount invested in corporate bonds should not exceed 33% to reduce risk, as well. a. How much should the National Credit Union invest in each security so as to maximize its return on investment? b. If the Treasury note yield drops to 3%, how would that affect the decision in (a)? Final answer must be typed in the Exam Quiz. Show all work including the definition of decision variables, objective function, and constraints to earn full credit. If Excel Solver is used, show screen captures of Solver paramters. If LPSolve is used, show the screen captures of the model and the solution.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Venture capital and the finance of innovation

Authors: Andrew Metrick

2nd Edition

9781118137888, 470454709, 1118137884, 978-0470454701

More Books

Students also viewed these Finance questions

Question

Define positive thinking and cite its benefits.

Answered: 1 week ago

Question

What is the connection between risk assessment and the CCP?

Answered: 1 week ago