Math Problem x1

Question

Landon just retired, and has $900,000 to invest. A very safe Certificate of Deposit (CD) account pays 2%, while a riskier bond fund pays 5.5% in interest. Landon figures he needs $32,000 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

.02X + .055(900,000-X) = 32,000

.02X -.055X = 32,000 - 49,500

.035X =17,500

X = $500,000 invested at 2% yields $10,000 return

$400,000 invested at 5.5% yields $22,000

10,000+22,000=32,000