Question Content Area

Quiz - Chapter 4

You have $10,000 cash and are now looking to invest these funds. Your research has identified the following investment opportunities and their projected annual rates of return. The investment and rates of return are shown below:

Investment	Projected Annual Rate of Return
Savings account	2.1%
Government bonds	4.25%
SU Company	5.2%
Hornets Inc.	4.7%

You have also identified the following investment guidelines:

Neither investment should receive 55% of your available cash.

Savings account should be at least 12% of the total of SU Company and Hornets Inc. investments.

Government bonds should be at least 17% of the total of SU Company and Hornets Inc. investments.

Using Excel Solver and Sensitivity Report, answer the following:

Where should you invest your available cash to maximize your return? What would be the amount of cash invested for each of your investment?

Assuming you can get a bank loan with interest rate of 4% annually for up to $5,000: explain whether it is recommended for you taking this loan? And, if yes, for how much?

Assuming you are evaluating your investment guidelines and would like to remove one of your current guidelines: explain which guidelines would you remove?