Assume that all the money available for investment is invested
Q2: A private investment club has $200,000 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
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 if the investment goal is to have a return of $20,000/year
on the total investment. (Assume that all the money available for investment is invested
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