An investment club has set a goal of earning 15% on the money it invests in stocks. The members are considering purchasing three possible stocks, with their cost per share (in dollars) and their projected growth per share (in dollars) summarized in the following table. (Let x = computer shares, y = utility shares, and z = retail shares.) Stocks Computer (x) Utility (y) Retail (z) Cost/share 30 44 26 Growth/share 6.00 6.00 2.40 (a) If they have $392,000 to invest, how many shares of each stock should they buy to meet their goal? (If there are infinitely many solutions, express your answers in terms of z as in Example 3.) (x, y, z) = ? (b) If they buy 700 shares of retail stock, how many shares of the other stocks should they buy? computer ? shares utility ? shares What if they buy 1400 shares of retail stock? computer ? shares utility ? shares (c) What is the minimum number of shares of computer stock they should buy? ? shares What is the number of shares of the other stocks in this case? utility ? shares retail ? shares (d) What is the maximum number of shares of computer stock they should purchase? ? shares What is the number of shares of the other stocks in this case? utility ? shares retail ? shares

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

An investment club has set a goal of earning 15% on the money it invests in stocks. The members are considering purchasing three possible stocks, with their cost per share (in dollars) and their projected growth per share (in dollars) summarized in the following table. (Let x = computer shares, y = utility shares, and z = retail shares.)

	Stocks
	Computer (x)	Utility (y)	Retail (z)
Cost/share	30	44	26
Growth/share	6.00	6.00	2.40

(a) If they have $392,000 to invest, how many shares of each stock should they buy to meet their goal? (If there are infinitely many solutions, express your answers in terms of z as in Example 3.)

(x, y, z) = ?

(b) If they buy 700 shares of retail stock, how many shares of the other stocks should they buy?

computer	? shares
utility	? shares

What if they buy 1400 shares of retail stock?

computer	? shares
utility	? shares

(c) What is the minimum number of shares of computer stock they should buy?
? shares

What is the number of shares of the other stocks in this case?

utility	? shares
retail	? shares

(d) What is the maximum number of shares of computer stock they should purchase?
? shares

What is the number of shares of the other stocks in this case?