Investment allocation

Question
Need to know how much of 4200 investment was at 15% and how much of 4200 investment was at 8% to equal profit of 448.



Solution
If you have available funds for investment and you want to create an investment plan in order for you to achieve a certain return on investment, then there is a need to allocate your investments.

For the investment problem above, the target return on investment of $4,200 is $448 and the investment portfolio is comprised of an investment with a return of 15% and another with a return of 8%.

So, how do we compute for the funds to be allocated to each investment option?

Let x = investment with a return of 15%
(4,200-x) = investment with a return of 8%

Therefore, the expected return on investment is .15x + .08(4,200-x) = 448

Simplify .07x + 336 = 448

Isolate x
x = $1,600

Therefore, the investor needs to invest $1,600 in the investment with an expected return of 15% and $2,600 in the investment with an expected return of 8% to achieve a portfolio rate of return of 10.67% or $448.

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