Reference no: EM131557141

Question: INVESTMENT CLUBS A private investment club has a certain amount of money 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, 6%/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 in each of the following scenarios. (In all cases, assume that the entire sum available for investment is invested.)

a. The club has $200,000 to invest, and the investment goal is to have a return of $20,000/year on the total investment.

b. The club has $220,000 to invest, and the investment goal is to have a return of $22,000/year on the total investment.

c. The club has $240,000 to invest, and the investment goal is to have a return of $22,000/year on the total investment.