Question

One safe investment pays 10% per year, and a more risky investment pays 14% per year.

a. How much must be invested in each account if an investor of $102,000 would like a return of $11,320 per year?
B. why might the investors use two accounts rather than put all the money in at 14% investment.

Answer 1

Principal = 102,000

Return - 11,320

Return = (principal x rate x time)/100

X = the amount invested at 14%

Then 102000- x = the amount invested at 10%

11320 = (x*14)/100 + (102000-x*10)100

x = 28,000

a) 28,000 is invested at 14%

74,000 is invested at 10%

b) The 14% investment is riskier so if all the money was in that account the investor could lose all his money.