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29 October, 05:00

Vern sold his 1964 ford mustang for $55,000 and wants to invest the money to earn him 5.8% interest per year. he will put some of the money into fund a that earns 3% per year and the rest in fund b that earns 10% per year. how much should he invest into each fund if he wants to earn 5.8% interest per year on the total amount?

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Answers (2)
  1. 29 October, 05:20
    0
    The correct answer is, $33000 in Fund A and $22000 in Fund B.

    Explanation:

    Fund A earns 3% per year

    Fund B earns 10% per year

    Required Rate of return is 5.8%

    (Wa x 3%) + [ (1-Wa) (10%) ] = 5.8% - - - Equation 1

    Wa = Weight of funds invested in Fund A

    1 - Wa = Weight of funds invested in Fund B

    Solving the equation 1 for Wa gives us, Wa = 0.6 and Wb = 0.4

    $55000 x 0.6 = $33000

    $55000 x 0.4 = $22000
  2. 29 October, 05:28
    0
    Here you go,

    $33,000 in Fund A, $22,000 in Fund B.
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