Question

Vern sold his 1964 Ford Mustang for $55,000 and wants to invest the money to earn him 3.6% interest per year. He will put some of the money into Fund A that earns 2% per year and the rest in Fund B that earns 10% per year. How much should he invest into each fund (in dollars) if he wants to earn 3.6% interest per year on the total amount?

Answer 1

Answer: He should invest $44000 in fund A and $11000 in fund B.

Step-by-step explanation:

Let x represent the amount which he invested in fund A.

Let y represent the amount which he invested in fund B.

Vern sold his 1964 Ford Mustang for $55,000 and wants to invest the money to earn him 3.6% interest per year. He will put some of the money into Fund A that earns 2% per year and the rest in Fund B that earns 10% per year.. This means that

x + y = 55000

The formula for determining simple interest is expressed as

I = PRT/100

Considering fund A,

P = $x

T = 1 year

R = 2℅

I = (x × 2 × 1)/100 = 0.02x

Considering fund B,

P = $y

T = 1 year

R = 10℅

I = (y × 10 × 1)/100 = 0.1y

The interest that he wants to earn on the total amount in a year is 3.6%. The interest would be

I = (55000 × 3.6 × 1)/100 = 1980

Therefore,

0.02x + 0.1y = 1980 - - - - - - - - - -1

Substituting x = 55000 - y into equation 1, it becomes

0.02(55000 - y) + 0.1y = 1980

1100 - 0.02y + 0.1y = 1980

- 0.02y + 0.1y = 1980 - 1100

0.08y = 880

y = 880/0.08

y = 11000

x = 55000 - y = 55000 - 11000

x = 44000