A private investment club has $600,000 earmarked for investment in stocks. To arrive at an acceptable overall level of risk, the stocks that management is considering have been classified into three categories: high-risk, medium-risk, and low-risk. Management estimates that high-risk stocks will have a rate of return of 15% / year; medium-risk stocks, 10%/year; and low-risk stocks, 7%/ year. The members have decided that the investment in low-risk stocks should be equal to the sum of the investments in the stocks of the other two categories. Determine how much the club should invest in each type of stock if the investment goal is to have a return of $60,000/year on the total investment. (Assume that all the money available for investment is invested.) high-risk stocks $ 24000 X medium-risk stocks $ low-risk stocks $

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Formulate a system of equations for the situation below and solve.
A private investment club has $600,000 earmarked for investment in stocks. To arrive at an acceptable overall level of risk, the stocks that management is considering have
been classified into three categories: high-risk, medium-risk, and low-risk. Management estimates that high-risk stocks will have a rate of return of 15% / year; medium-risk
stocks, 10%/year; and low-risk stocks, 7%/year. The members have decided that the investment in low-risk stocks should be equal to the sum of the investments in the
stocks of the other two categories. Determine how much the club should invest in each type of stock if the investment goal is to have a return of $60,000/year on the total
investment. (Assume that all the money available for investment is invested.)
high-risk stocks
$ 24000
X
medium-risk stocks
low-risk stocks
LA
LA
Transcribed Image Text:Formulate a system of equations for the situation below and solve. A private investment club has $600,000 earmarked for investment in stocks. To arrive at an acceptable overall level of risk, the stocks that management is considering have been classified into three categories: high-risk, medium-risk, and low-risk. Management estimates that high-risk stocks will have a rate of return of 15% / year; medium-risk stocks, 10%/year; and low-risk stocks, 7%/year. The members have decided that the investment in low-risk stocks should be equal to the sum of the investments in the stocks of the other two categories. Determine how much the club should invest in each type of stock if the investment goal is to have a return of $60,000/year on the total investment. (Assume that all the money available for investment is invested.) high-risk stocks $ 24000 X medium-risk stocks low-risk stocks LA LA
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