Question

Wendy was awarded a volleyball scholarship to the university of michigan, so on graduation her parents gave her the dollar-sign 19,000 they had saved for her college tuition. she opted to invest some money in a privately held company that pays 10 % per year and evenly split the remaining money between a money market account yielding 2 % and a high-risk stock that yielded 40 %. at the end of the first year she had dollar-sign 22,440 total. how much did she invest in each of the three?

Answer 1

Total investment = $19000

Three investments

A. 10% per annum = $X

(Assumed simple interest, since compounding period not known)

B. low risk stock at 2% = (19000-X)/2

C. high risk stock at 40% = (19000-X)/2

Value at the end of one year

10%(X)+2%(19000-X)/2+40%(19000-X)/2 = 22440-19000

Simplify

0.1X+190-0.01X+3800-0.2X=22400-19000

0.11X=3990-3440

X=550/0.11=5000

So investments are $5000 on private company, (19000-5000)/2=7000 on low risk, and 7000 on high-risk.