The National Credit Union has $250,000 available to invest in a12-month commitment. The money can be placed in Treasury notesyielding an 8% return or in municipal bonds at an average rate ofreturn of 7%. Credit union regulations require diversification tothe extent that at least 50% of the investment be placed inTreasury notes. Because of defaults in such municipalities asCleveland and New York, it is decided that no more than 40% of theinvestment be placed in bonds.
(a) How much should the National Credit Union invest in Treasury notesso as to maximize its return on investment?
(b) How much should the National Credit Union invest in municipal bondsso as to maximize its return on investment?
(c) What is the maximal return on investment?