A person has $40,000 to invest. As the persons financial consultant, you recommend that the money be invested in Treasury bills that yield 3%, Treasury bonds that yield 6%, and corporate bonds that yield 9%. The person wants to have an annual income of $2190, and the amount invested in corporate bonds must be half that invested in Treasury bills. Find the amount in each investment.
What is the solution? (hint: write 3 equations using x=treasury bills, y=treasury bonds, z=corporate bonds.)
What is the solution? (hint: write 3 equations using x=treasury bills, y=treasury bonds, z=corporate bonds.)
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You have 3 unknowns, so you need 3 equations. Since:
x = amount $$ in t-bills @ 3%
y = amount $$ in t-bonds @ 6%
z = amount $$ in c-bonds @ 9%,
then your #1 equation is:
x + y + z = 40,000 (eqn #1)
Since the total will yield income of $2190, that is the sum of the amounts of interest earned from each investment:
0.03x + 0.06y + 0.09z = 2190. Multiply both sides by 10 to get rid of decimals:
3x + 6y + 9z = 219,000 (eqn #2)
You are told that the amount in c-bonds is half the amount in t-bills, so:
z = (1/2)x. Multiply both sides by 2 if you want to get rid of fractions:
2z = x (eqn #3)
Once you have these three equations, you probably know now how to solve for the three unknowns... you should make sure you do. By my calculations, you should get:
x = $14,000
y = $19,000
z = $7,000
x = amount $$ in t-bills @ 3%
y = amount $$ in t-bonds @ 6%
z = amount $$ in c-bonds @ 9%,
then your #1 equation is:
x + y + z = 40,000 (eqn #1)
Since the total will yield income of $2190, that is the sum of the amounts of interest earned from each investment:
0.03x + 0.06y + 0.09z = 2190. Multiply both sides by 10 to get rid of decimals:
3x + 6y + 9z = 219,000 (eqn #2)
You are told that the amount in c-bonds is half the amount in t-bills, so:
z = (1/2)x. Multiply both sides by 2 if you want to get rid of fractions:
2z = x (eqn #3)
Once you have these three equations, you probably know now how to solve for the three unknowns... you should make sure you do. By my calculations, you should get:
x = $14,000
y = $19,000
z = $7,000