You inherit $50000 from a rich great-aunt who died. You contact a financial advi

Question

You inherit $50000 from a rich great-aunt who died. You contact a financial advisor who recommends that you invest your money in a money market account, in municipal bonds and in a mutual fund. You find a money market account that is paying 6% interest annually, some mutual bonds that are paying 5% interest annually and a mutual fund that is paying 7.5% interest annually. You decide to invest $11000 more in the mutual fund than in the municipal bonds. If you receive a check for $3225 in interest after one year, how much money was invested in each account? The amount of money the investor placed in each type of investment. Enter to the nearest dollar. Do not use commas in the number The amount of money invested in the money market account-S The amount of money invested in municipal bonds $ The amount of money invested in a mutual fund$

Explanation / Answer

Let money invested in mutual bonds = $ x

Interest rate in mutual bonds = 5%

Let money invested in money market account = $ y

Interest rate in money market account = 6%

therefore

Money invested in mutual funds (Given) = $ (x + 11000)

Interest rate in mutual funds = 7.5%

So total amount invested = x + (x + 11000) + y = 50000 ................................................eq (1)

interest rate formula = P[1 +( R/100) ]^n

where n = number of years ; P = principal amount invested ; R = Interest rate  

Given net interest earned in one year = $ 3225 = x( 1 + 0.05) + (x + 11000)( 1 + .075) + y( 1 + 0.06) .........eq(2)

= 2.25x + 1.06y = 2400 .........................................eq (2)

solving two equations we get

x =29.9251870324 approx equal 30

y=38,940.149625935 approx 38940

so money invested in mutual fund $(30 + 11000) = $ 11030

so money invested in mutual bond = $ 30

so money invested in money market account = $38940

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.