Ed invests $68,000 in certificates of deposit (i.e., CDs) paying 1.75%. How much additional money does he
need to invest in stocks that are expected to generate a return of 11.8% so that the average return on all of
Ed’s investments is 7.5%?
.0175*68000 + .118x = .075(68000+x)
To find out how much additional money Ed needs to invest in stocks, we need to know the total amount of money he has invested and the different rates of return.
Let's break down the problem and solve it step by step:
1. We know that Ed has invested $68,000 in certificates of deposit (CDs) paying 1.75%. So, the total return from CDs can be calculated as follows:
CD return = CD investment * CD rate
= $68,000 * 1.75%
= $1190
2. Now, we need to find the average return on all of Ed's investments, which is 7.5%. We can use the weighted average formula to determine the required amount to be invested in stocks.
Average return = (CD return + Stock return) / Total investment
Rearranging the formula, we get:
Stock return = (Average return * Total investment) - CD return
3. We know that the average return is 7.5% and the CD return is $1190. We also need to find out the total investment. However, the problem doesn't provide the total investment amount. In order to solve this, we need more information about the total investment or the proportions of the investment in CD and stocks.
Please provide the additional information to accurately determine the required additional investment in stocks.