Chapter 8.3, Problem 64E

To determine

The amount invested in each type of bond by using the inverse of the coefficient matrix.

Answer to Problem 64E

  $x=200000,y=100000,$ and $z=200000$ .

Explanation of Solution

Given information:

The average yields are $6.5\%$ on AAA bonds, $7\%$ on A bonds, and $9\%$ on B bonds.

  $\{\begin{array}{l}x+y+z=(\text{total investment})\\ 0.065x+0.07y+0.09z=(\text{annual return})\\ 2y-z=0\end{array}$

Use the inverse of the coefficient matrix of this system to find the amount invested in each type of bond.

  $\begin{array}{l}\text{Total investment Annual Return}\\ \$500,000\text{ \$38,000}\end{array}$

Calculation:

The given system of equation is:

  $\{\begin{array}{l}x+y+z=(\text{total investment})\\ 0.065x+0.07y+0.09z=(\text{annual return})\\ 2y-z=0\end{array}$

Convert the augmented matrix into the row-echelon form by gauss elimination method:

Firstly find the pivot in the first column in the first row:

  $\left[\begin{array}{ccc}1& 1& 1\\ 0.065& 0.07& 0.09\\ 0& 2& -1\end{array}|\begin{array}{c}500,000\\ 38,000\\ 0\end{array}\right]$

Eliminate the first column and make the pivot in the second column by dividing the second row by $0.005$ :

  $\left[\begin{array}{ccc}1& 1& 1\\ 0& 1& 5\\ 0& 2& -1\end{array}|\begin{array}{c}50,000\\ 11,00000\\ 0\end{array}\right]$

Eliminate the second column and make the pivot in the third column by dividing the third row by $-11$ :

  $\left[\begin{array}{ccc}1& 0& -4\\ 0& 1& 5\\ 0& 0& 1\end{array}|\begin{array}{c}-600000\\ 1100000\\ 200000\end{array}\right]$

Eliminate the third column:

  $\left[\begin{array}{ccc}1& 0& 0\\ 0& 1& 0\\ 0& 0& 1\end{array}|\begin{array}{c}200000\\ 100000\\ 200000\end{array}\right]$

Therefore, the solutions are $x=200000,y=100000,$ and $z=200000$ .