Question

Mark wants to invest $10,000 to pay for his daughter's wedding next year. He will invest some of the money in a short term CD that pays 12% interest and the rest in a money market savings account that pays 5% interest. How much should he invest at each rate if he wants to earn $1,095 in interest in one year?

Answer 1

Explanation:

Let x be the amount that Mark invests in the short term CD that pays 12% interest, then he will invest (10000 - x) in the money market savings account that pays 5% interest.

The interest earned on the CD after one year will be 0.12x, and the interest earned on the savings account will be 0.05(10000 - x).

According to the problem statement, Mark wants to earn $1,095 in interest in one year. Therefore, we can set up the following equation:

0.12x + 0.05(10000 - x) = 1095

Expanding and simplifying, we get:

0.12x + 500 - 0.05x = 1095

0.07x = 595

x = 8500

Therefore, Mark should invest $8,500 in the short term CD that pays 12% interest, and he should invest $1,500 in the money market savings account that pays 5% interest.

Check:

Interest earned on the CD = 0.12(8500) = 1020

Interest earned on the savings account = 0.05(1500) = 75

Total interest earned = 1020 + 75 = 1095.

Therefore, the solution checks out.