Suzanne Invested $14,300 in Two Mutual Fund Accounts: the Abernathy

question 13

Essay

Suzanne invested $14,300 in two mutual fund accounts: the Abernathy Fund and the Brice Fund. During the subsequent year, The Abernathy Fund earned 4% and the Brice account earned 5%. At the end of the year, the total interest earned was $672. How much did Suzanne invest in each fund?

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Definitions:

Risk Premium

The extra return expected by an investor for holding a risky asset instead of a risk-free asset, serving as compensation for bearing additional risk.

Arbitrage Opportunity

An arbitrage opportunity is the chance to buy an asset at a low price in one market and sell it at a higher price in another, taking advantage of the price difference for profit.

Expected Return

The anticipated amount of returns an investment is expected to generate, calculated as a weighted average of possible returns, based on their probabilities.

Risk-free Rate

The theoretical return on an investment with zero risk, often represented by the yield on government securities like U.S. Treasury bills.