Question

Betsy, a recent retiree, requires $6,000 per year in extra income. She has $70,000 to invest and can invest in B-rated bonds paying 13% per year or in a certificate of deposit ( CD ) paying 3% per year. How much money should be invested in each to realize exactly $6,000 in interest per year?

Answer 1

The amount of money invested at 13% is $39,000 while the amount of money invested at 3% is $31,000

Explanation:

Extra income required per year $6,000

Total investment = $70,000

Let x = amount of money Invested at 13% ;

Then 70,000 - x = amount of money Invested at 3%

Total interest required = $6,000

Thus;

x × 0.13 + (70,000 - x) × 0.03 = 6,000

⇒ 0.13x + 2100 - 0.03x = 6,000

0.13x - 0.03x + 2100 = 6,000

0.1x = 6,000 - 2100

0.1x = 3,900

x = 3,900/0.1

x = $39,000

Thus, what this means is that the amount of money invested at 13% is $39,000 while the amount of money invested at 3% is $70,000 - $39,000 = $31,000

PS ; IN CASE YOU ARE WONDERING WHERE 1.3 AND 0.3 CAME INTO THE CALCULATION, 13% IS (13/100 = 0.13) WHILE 3% IS (3/100 = 0.03)