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35 votes
HELP FAST!!!!

INVESTMENTS Your aunt receives an inheritance of $20,000. She wants to
put some of the money into a savings account that earns 2% interest annually and
invest the rest in certificates of deposit (CDs) and bonds. A broker tells her that
CDs pay 5% interest annually and bonds pay 6% interest annually. She wants to
earn $1000 interest per year, and she wants to put twice as much money in CDs
as in bonds. How much should she put in each type of investment?
11.

User Pavel Cermak
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1 Answer

28 votes
28 votes

Answer: She needs to invest 6,000 in bonds,6,000inbonds,12,000 in CDs and 2000 in the Savings account to earn a2000intheSavingsaccounttoearna1000 interest.

We follow these steps in order to arrive at the answer:

Let the amount invested in bonds be x

Since the amount to be invested in CDs is twice the investment in bonds, investment in CDs will 2x.

The amount to be invested in the savings bank will be 20000 - (x+2x)20000−(x+2x) or 20,000 - 3x20,000−3x

The interest earned on bonds will be 0.06x0.06x

The interest earned on CDs will be 2x*0.05 = 0.1x2x∗0.05=0.1x

The interest earned on the savings banks accounts will be (20,000-3x)*0.02 = 400-0.06x(20,000−3x)∗0.02=400−0.06x

The total expected interest of $1000 is the sum total of the interest earned from each of the three modes of investment.

Hence total interest is:

1000 = 0.06x + 0.1x+ 400 -0.06x1000=0.06x+0.1x+400−0.06x

Simplifying we get,

1000 -400 = 0.1x1000−400=0.1x

600 = 0.1x600=0.1x

\mathbf{x = 6,000}x=6,000

Since x represents investments in bonds, the investment in CDs will be \mathbf{2x = 2*6,000 = 12,000}2x=2∗6,000=12,000

Finally the investments in savings bank will be \mathbf{20000 - (12,000 + 6,000) = 20,000 - 18,000 = 2,000}20000−(12,000+6,000)=20,000−18,000=2,000

User Pavel Chlupacek
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