Help Please! Interest with 2 variables

Question

Casey just retired, and has $760,000 to invest. A very safe Certificate of Deposit (CD) account pays 2.5%, while a riskier bond fund pays 5% in interest. Casey figures he needs $34,000 a year in interest to live on. How much should he invest in each account to make enough interest while minimizing his risk?

Answer 1

Hi Kate

 

let x= amount invested in the cd

let y= amount invested in the bond

 

x+y=760000

.025x+.05y=34000. (This shows the income from investing in both investments 

 

multiply the first equation by .05

 

.05x + .05y =38000

.025x+.05y =34000

 

sbtract the second from the first

 

.025x = 4000

x = 160000. (Amount invested in cd

 

x + y=760000

160000+y= 760000

y = 600000

 

hope this helps

Tom