Math Problem Statement
YOu have $32,000 you would like to invest in two different stocks, Stock Boll and Stock Coff. The buying limit on Stock Coff is $12,600 and you want to spend at least four times as much money on Stock Boll as Stock Coff. If Stock Boll earns 6% annual interest and Stock Coff earns 4% annual interest, how much money (in dollars) should you invest in each stock to maximize your annual interest earned? What is the maximum annual interest (in dollars)? You will earn a maximum total annual interest of $
Solution
Let's define variables to represent the amounts of money invested in each stock:
- Let be the amount invested in Stock Coff.
- Let be the amount invested in Stock Boll.
We know the following:
- The total investment is $32,000, so:
- The buying limit for Stock Coff is $12,600, so:
- You want to invest at least four times as much in Stock Boll as in Stock Coff, so:
- Stock Coff earns 4% annual interest and Stock Boll earns 6% annual interest. The total interest earned is given by:
Step 1: Express in terms of
From the first equation , we can express as:
Step 2: Substitute into the inequality
Substituting into gives: Solving this inequality:
Step 3: Determine the feasible range for
We have two constraints on :
- From the buying limit:
- From the inequality:
Thus, the maximum amount we can invest in Stock Coff is . The feasible range for is:
Step 4: Calculate the corresponding value of
When , we substitute this into to get:
Step 5: Calculate the total interest earned
Now, we compute the total interest earned using and :
Final Answer:
- Amount to invest in Stock Coff: $6,400
- Amount to invest in Stock Boll: $25,600
- Maximum annual interest: $1,792
Do you need further details or clarifications? Here are five related questions to explore:
- What happens to the total interest if the interest rates for both stocks are switched?
- How would the solution change if you wanted to invest at least 3 times as much in Stock Boll instead of 4 times?
- What is the effect on the maximum interest if the total amount to invest is increased to $40,000?
- How much less annual interest would you earn if the buying limit on Stock Coff were lowered to $10,000?
- What would be the total interest if Stock Boll's interest rate increased to 8%?
Tip: Always check your constraints carefully in optimization problems to ensure you're maximizing your return while staying within limits.
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Math Problem Analysis
Mathematical Concepts
Linear Inequalities
Optimization
Interest Calculation
Formulas
x + y = 32,000
y ≥ 4x
I = 0.04x + 0.06y
Theorems
Linear Programming
Suitable Grade Level
Grades 10-12
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