Question

You make two separate investments for a total of $4,000. The percent return on Charles Schwab & Co. at the end of the year was 5% and the percent return on Merrill Lynch with 7%. The combined return on both funds was $256. How much should you invest in each fund?

Answer 1

Let x represent the amount invested in Charles Schwab & Co.

Let y represent the amount invested in Merrill Lynch.

Given that the total amount invested is $4000, it means that

x + y = 4000

x = 4000 - y equation 1

The percent return is also known as the interest.

The interest from the amount invested with Charles Schwab & Co is 5%. The amount of interest is

5/100 * x = 0.05x

The interest from the amount invested with Merrill Lynch is 7%. The amount of interest is

7/100 * y = 0.07y

Given that the combined return on both funds was $256, it means that

0.05x + 0.07y = 256 equation 2

Substituting equation 1 into equation 2, it becomes

0.05(4000 - y) + 0.07y = 256

200 - 0.05y + 0.07y = 256

- 0.05y + 0.07y = 256 - 200

0.02y = 56

y = 56/0.02

y = 2800

x = 4000 - y = 4000 - 2800

x = 1200

$1200 should be invested with Charles Schwab & Co and $2800 should be invested with Merrill Lynch