Problema Solution

Denzel, a recent retiree requires $5000 per year in extra income to continue his current life style. He has $70000 retirement bonus to invest. Denzel wants to invest some of the money in a less risky certificate of deposit (CD) which pays an annual rate of 5%. The remainder will be invested in a more risky bond which is currently paying 8%. How much money should be invested in each to realize exactly $5000 in interesr per year?

Answer provided by our tutors

Let 'x' represent the amount invested in CD at 5% annual rate and 'y' the amount invested in bonds at 8%.

x + y = 70000

0.05x + 0.08y = 5000

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click here to see the system of equations solved for x and y

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x = $20,000

y = $50,000

$20,000 should be invested in CD while the rest, $50,000 should be invested in bonds.