Jones has $70,000 to invest and requires an overall rate of return of 9%. He can invest in a safe certificate of deposit that pays 8% interest. To get 9%, he would like to invest some of his money in corporate bonds paying 12%. How much should be placed in each investment to achieve his goal?
thank you very much.
thank you very much.
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You're looking for two amounts of money that add to $70,000. One will get 8% interest and the other 12%, and you want the two amounts of interest to add up to 9% of the original number. You'll need to combine two equations.
a + b = 70,000
This is because the two need to add to 70,000.
.08a + .12b = .09(70,000)
The 8% interest of the money in the safe certificate of deposit, and the 12% interest of the money in bonds, need to add up to 9% of the original 70,000.
Now you can combine the equations by multiplying the first one by -.08 to get:
-.08a -.08b = -5600
Then adding the two equations:
-.08a -.08b = -5600
.08a + .12b = 6300
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.04b = 700
Then you can solve for b, and plug it in to one of the original equations to find a.
a + b = 70,000
This is because the two need to add to 70,000.
.08a + .12b = .09(70,000)
The 8% interest of the money in the safe certificate of deposit, and the 12% interest of the money in bonds, need to add up to 9% of the original 70,000.
Now you can combine the equations by multiplying the first one by -.08 to get:
-.08a -.08b = -5600
Then adding the two equations:
-.08a -.08b = -5600
.08a + .12b = 6300
--------------------------------------…
.04b = 700
Then you can solve for b, and plug it in to one of the original equations to find a.
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70,000*0.09 = 0.08P+(70,000-P)*0.12
6,300=0.08P+8,400-0.12P
0.04P = 2,100
P = $52,500 @ 8%
and $17,500 @ 12%
6,300=0.08P+8,400-0.12P
0.04P = 2,100
P = $52,500 @ 8%
and $17,500 @ 12%