Problema Solution
Ed Moura has 65000 invested in stocks paying 5 percent. How much additional money should he invest in certificates of deposit paying 2 percent so that the average return on the two investments is 3 percent?
Answer provided by our tutors
Let
P = $65,000 invested paying rate r1 = 5%
x = additional money invested paying r2 = 2%
The average return of the 2 investments together: (P +x), should be r = 3%
Since Interest = Invested money * Rate we have:
P*r1 + x*r2 = (P + x)* r
0.05*65000 + 0.02*x = 0.03(x + 65000)
........
click here to see the equation solved for x
........
x = $130,000
Ed Moura should invest $130,000 additional money in certificates of deposit.