You have $90,000 for investment. You will invest S dollars in stocks and B dollars in bonds. You expect a 10% return on stocks and a 2% return on bonds. You want a total return of 5% on your investment. (a) The dollar amount of the total return is 0.05 ✕ 90,000 = $4500. What is the dollar amount of return for stocks, and what is the dollar amount for bonds? (Suggestion: Your answers will involve the variables S and B.) stocks dollars bonds dollars (b) Write a system of two equations in two unknowns that determines how much will be invested in each category. (Suggestion: One equation should show the total amount invested. The second equation should show the total dollar return.) S + B = 4500 .10S + .02B = 90,000 S + B = 4500 .02S − .10B = 90,000 S + B = 90,000 .10S + .02B = 4500 S + B = 90,000 .10S − .02B = 4500 S + B = 4500 .02S + .10B = 90,000 (c) Solve the system from part (b) to find the amount invested in stocks and the amount invested in bonds. stocks$ bonds$
You have $90,000 for investment. You will invest S dollars in stocks and B dollars in bonds. You expect a 10% return on stocks and a 2% return on bonds. You want a total return of 5% on your investment. (a) The dollar amount of the total return is 0.05 ✕ 90,000 = $4500. What is the dollar amount of return for stocks, and what is the dollar amount for bonds? (Suggestion: Your answers will involve the variables S and B.) stocks dollars bonds dollars (b) Write a system of two equations in two unknowns that determines how much will be invested in each category. (Suggestion: One equation should show the total amount invested. The second equation should show the total dollar return.) S + B = 4500 .10S + .02B = 90,000 S + B = 4500 .02S − .10B = 90,000 S + B = 90,000 .10S + .02B = 4500 S + B = 90,000 .10S − .02B = 4500 S + B = 4500 .02S + .10B = 90,000 (c) Solve the system from part (b) to find the amount invested in stocks and the amount invested in bonds. stocks$ bonds$
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter16: Capital Structure Decisions
Section: Chapter Questions
Problem 10MC: Suppose there is a large probability that L will default on its debt. For the purpose of this...
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You have $90,000 for investment. You will invest S dollars in stocks and B dollars in bonds. You expect a 10% return on stocks and a 2% return on bonds. You want a total return of 5% on your investment.
(a) The dollar amount of the total return is
0.05 ✕ 90,000 = $4500. What is the dollar amount of return for stocks, and what is the dollar amount for bonds? (Suggestion: Your answers will involve the variables S and B.)
stocks dollars
bonds dollars
(b)
Write a system of two equations in two unknowns that determines how much will be invested in each category. (Suggestion: One equation should show the total amount invested. The second equation should show the total dollar return.)
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| S + B | = | 4500 |
| .10S + .02B | = | 90,000 |
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| S + B | = | 4500 |
| .02S − .10B | = | 90,000 |
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| S + B | = | 90,000 |
| .10S + .02B | = | 4500 |
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| S + B | = | 90,000 |
| .10S − .02B | = | 4500 |
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| S + B | = | 4500 |
| .02S + .10B | = | 90,000 |
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(c)
Solve the system from part (b) to find the amount invested in stocks and the amount invested in bonds.
stocks$ bonds$
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