Natsano has at most $60,000 to invest in the common stocks of two companies. He estimates that an investment in company A will yield a return of 10%, whereas an investment in company B, which he feels is a riskier investment, will yield a return of 20%. If he decides that his investment in the stocks of company A is to exceed his investment in the stocks of company B by at least $30,000, determine how much he should invest in the stocks of each company in order to maximize the returns on his investment.
A) Investment in company A is $15,000. Investment in company B is $45,000.
B) Investment in company A is $45,000. Investment in company B is $15,000.
C) Investment in company A is $60,000. Investment in company B is $0.
D) Investment in company A is $40,000. Investment in company B is $20,000.
E) Investment in company A is $0. Investment in company B is $60,000.

Question

Quizplus · Accepted Answer

To maximize returns while meeting the condition that investment in A exceeds investment in B by at least $30,000, Natsano should invest the minimum in A to have more funds for B, which has a higher return rate. With a $60,000 limit and a $30,000 difference requirement, the optimal allocation is $45,000 in A and $15,000 in B, maximizing returns while adhering to the constraints.

Natsano Has at Most $60,000 to Invest in the Common