Question

A retired couple has $170,000 to invest to obtain annual income. They want some of it invested in safe Certificates of Deposit yielding 5%. The rest they want to invest in AA bonds yielding 11% per year. How much should they invest in each to realize exactly $15,700 per year?

Answer 1

Let c=amount invested in C o D, then 170000-c is invested in AA bonds.

So 0.05c+0.11(170000-c)=15700.

0.05c+18700-0.11c=15700

3000=0.06c

c=3000/0.06=300000/6=50000.

C o D investment=$50,000 and AA investment=$120,000.

CHECK

0.05 of $50000=$2,500; 0.11 of $120000=$13,200; 2,500+13,200=$15,700.