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27 April, 08:24

Jane and Joe made two investments of $25,000 and $40,000 with different investors that yielded a combined rate of return of 10% compounded for 6 years. If the rate return on the first investment was 9%, what is the rate of return the couple obtained on the second investment?

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  1. 27 April, 08:54
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    10.625%

    Explanation:

    The combined rate of return for two investments can be calculated using the below mentioned formula:

    Combined interest=[ (interest rate of first investment*first investment+interest rate of second investment*second investment) / (First investment+Second investment) ]

    In the given question

    Combined interest=10%

    Interest rate of first investment=9%

    First investment=$25,000

    Interest rate of second investment=?

    Second investment=$40,000

    10%=[ (9%*25,000+Interest rate of second investment*$40,000) / (25,000+40,000) ]

    10% = (2250+Interest rate of second investment*$40,000) / 65,000

    10%*65,000=2250+Interest rate of second investment*$40,000

    6500-2250=Interest rate of second investment*$40,000

    4,250=Interest rate of second investment*$40,000

    Interest rate of second investment=10.625%
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