posted by Bruce .
. Margaret is planning to invest up to $22,000 in certificates of deposit at City Bank and People’s Bank. She wants to invest at least $2,000 but no more than $14,000 at City Bank. People’s Bank does not insure more than a $15,000 investment, so she will invest no more than that in People’s Bank. The interest is 6% at City Bank and 6½% at Peoples Bank. This is simple interest for one year. How much should she invest in each bank in order to maximize her income? What is the maximum income?
1. Peoples Bank, 15000 @ 6.5 %.
City Bank, 7000 @ 6%.
2. Peoples Bank:
Pt = Po + r*t*Po,
Pt = 15000 + 0.065 / yr *1yr * 15000,
Pt = 15000 + 975 = 15975.
Pt = 7000 + 0.06 / yr * 1yr * 7000,
Pt = 7000 + 420 = 7420.
Total Income = 15975 + 7420 = 23395.