You Invest in AAA-Rated Bonds, A-Rated Bonds, and B-Rated Bonds

question 37

Multiple Choice

You invest in AAA-rated bonds, A-rated bonds, and B-rated bonds.Your average yield is 6% on AAA bonds, 9% on A bonds, and 9% on B bonds.You invest twice as much in B bonds as in A bonds.The desired system of linear equations (where and represent the amounts invested in AAA, A, and B bonds, respectively) is as follows. Use the inverse of the coefficient matrix of this system to find the amount invested in A bonds for the given a total investment of $45,000 and annual return of $3780.

• A) $12,000
• B) $24,000
• C) $10,000
• D) $1000
• E) $6000

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Definitions:

Dividend Yield

A financial measure that represents the yearly dividend payout by a company compared to its stock price.

Expected Growth Rate

This is the rate at which a company, economy, or investment is anticipated to grow at an average annual rate over a specified period.

Expected Capital Gains Yield

The anticipated return on an investment due to the appreciation in value of the investment's assets, excluding dividends.

Constant Rate

A steady, unchanging rate of growth or decline, often used in the context of compounding interest or economic indicators.