Ashley has earmarked at most $350,000 for investment in three mutual funds: a money market fund, an international equity fund, and a growth-and-income fund. The money market fund has a rate of return of 7%/year, the international equity fund has a rate of return of 12%/year, and the growth-and-income fund has a rate of return of 16%/year. Ashley has stipulated that no more than 25% of her total portfolio should be in the growth-and-income fund and that no more than 50% of her total portfolio should be in the international equity fund. To maximize the return on her investment, how much should Ashley invest in each type of fund? What is the maximum return?
A) $57,500 in the money market fund, $205,000 in the international equity fund, $57,500 in the growth-and-income fund; maximum return $37,825
B) $87,500 in the money market fund, $175,000 in the international equity fund, $175,000 in the growth-and-income fund; maximum return $55,125
C) $87,500 in the money market fund, $175,000 in the international equity fund, $87,500 in the growth-and-income fund; maximum return $41,125
D) $205,000 in the money market fund, $57,500 in the international equity fund, $205,000 in the growth-and-income fund; maximum return $54,050

Question

Quizplus · Accepted Answer

Ashley should invest $87,500 in the money market fund, $175,000 in the international equity fund, and $87,500 in the growth-and-income fund to maximize her return while adhering to her investment constraints. This allocation respects the limits of no more than 25% in the growth-and-income fund and no more than 50% in the international equity fund, resulting in a maximum return of $41,125.

Ashley Has Earmarked at Most $350,000 for Investment in Three