posted by Hannah on .
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 17% per year or in a CD paying 7% per year. How much money should be invested in each to realize exactly $6,000 in interest per year?
I do not know what to do for this.
For B-rated bonds at 17%, she gets
$70000*0.17=$11900 per year
In CD at 7%, she gets
$70000*0.07=$4900 per year.
If she invests $x in B-rated bonds, and $(70000-x) in CD, she should get $6000, or
$x*0.17+(70000-x)*0.07 = 6000
Solve for x
Would x be $4,583.33?
From the equation x(o.17) + (70,000-x)(0.07) = 6,000
I got 0.17x + 4,900 -0.07x = 6,000 and then I subtracted 4,900 from 6,000 and I added 0.07 to 0.17 and got 0.24x. Is this correct?
6000-4900=1100 is correct, but
0.17x-0.07x=0.1x (not add)
So x=4583.33 is not correct (it should be more than double 4583.)
The easiest way to check is to put x back in the equation and see if it comes out to be $6000.