Question

You have $50,000 to invest, and two funds that you'd like to invest in. The You-Risk-It Fund (Fund Y) yields 14% interest. The Extra-Dull Fund (Fund X) yields 6% interest. Because of college financial-aid implications, you don't think you can afford to earn more than $4,500 in interest income this year. How much should you put in each fund?

Answer 1

Principal Fund Y = $18,750

Principal Fund X = $31,250

Explanation:

Given;

Total amount to invest = $50,000

Maximum amount of interest =$4,500

For fund Y;

Let y represent the amount invested(principal) in fund Y

Interest = 14% = 0.14

Time = 1 year

Interest = principal × rate × time

Interest on fund y = y × 0.14 × 1= 0.14y

For fund X;

The amount invested in fund X can be given as

x =50,000-y

Rate = 6% = 0.06

Time = 1 year

Interest on fund X = x × 0.06 ×1 = 0.06x = 0.06(50,000-y)

Total interest = interest on fund Y + fund X

$4,500 = 0.14y + 0.06(50,000 - y)

4500 = 0.14y - 0.06y + 3000

0.8y = 4500-3000

0.8y = 1500

y = 1500/0.08

y = $18,750

x = $50,000 - $18,750

x = $31,250