Mathematics
A financier plans to invest up to $500,000 in two projects.

Question Description

A financier plans to invest up to $500,000 in two projects. Project A yields a return of 10% on the investment of x dollars, whereas Project yields a return of 16% on the investment of y dollars. Because the investment in Project B is riskier than the investment in Project A, she has decided that the investment in Project B should not exceed 40% of the total investment. How much should the financier invest in each project in order to maximize the return on her investment?

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Final Answer

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Let he invest $X  in project A & $Y in project B
therefore X +Y = 500000   

aim : maximise : Yield = 0.10X + 0.16Y

Y <=0.4 *500000 =200000

this is a linear programming problem & Can be solved using EXCEL

... maximum investment in project B is 200000 in this case investment in project A = 300000

yield : 0.1* 300000+0.16*200000=  $ 62000

If  reducing investment on B let us say 190000 then investment in project A will be 310000

&  yield : 0.1* 310000+0.16*190000=  $ 61400

hence yield start reducing therefore correct answer

Project A :  300000

Project B : 200000


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