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17 March, 04:35

You have $50,000 to invest, and two funds that you'd like to invest in. The You-Risk-It Fund (Fund Y) yields 14% interest. The Extra-Dull Fund (Fund X) yields 6% interest. Because of college financial-aid implications, you don't think you can afford to earn more than $4,500 in interest income this year. How much should you put in each fund?

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  1. 17 March, 04:47
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    Principal Fund Y = $18,750

    Principal Fund X = $31,250

    Step-by-step explanation:

    Given;

    Total amount to invest = $50,000

    Maximum amount of interest = $4,500

    For fund Y;

    Let y represent the amount invested (principal) in fund Y

    Interest = 14% = 0.14

    Time = 1 year

    Interest = principal * rate * time

    Interest on fund y = y * 0.14 * 1 = 0.14y

    For fund X;

    The amount invested in fund X can be given as

    x = 50,000-y

    Rate = 6% = 0.06

    Time = 1 year

    Interest on fund X = x * 0.06 * 1 = 0.06x = 0.06 (50,000-y)

    Total interest = interest on fund Y + fund X

    $4,500 = 0.14y + 0.06 (50,000 - y)

    4500 = 0.14y - 0.06y + 3000

    0.8y = 4500-3000

    0.8y = 1500

    y = 1500/0.08

    y = $18,750

    x = $50,000 - $18,750

    x = $31,250
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