Question

Mr. Hamilton has 60,000 to invest in a tax-free fund and in a money market fund. The tax-free fund pays 7.5%, and the money market pays 8.5%. How much should he invest in tax-free to get a return of $4,790?

Answer 1

He should invest $31,000 in tax-free to get a return of $4,790

Explanation:

Let the amount he will invest in tax-free be $x while the amount in money market be $y

Adding both we have the total;

x + y = 60,000 ••••••••(i)

Then let’s work with the percentages;

7.5% of x + 8.5% of y = 4,790

7.5/100 * x + 8.5/100 * y = 4,790

7.5x/100 + 8.5y/100 = 4790

multiply through by 100

7.5x + 8.5y = 479000 ••••••(ii)

From i, y = 60,000 - x

Put this into ii

7.5x + 8.5(60,000-x) = 479000

7.5x + 510,000 -8.5x = 479000

8.5x - 7.5x = 510,000 - 479,000

x = $31,000