SOLUTION: How do you set up this word problem using I=P*R*T? Steve has $25,000 to invest and wishes to earn an overall annual rate of return of 8%. His financial advisor recommends that h

SOLUTION: How do you set up this word problem using I=PRT? Steve has $25,000 to invest and wishes to earn an overall annual rate of return of 8%. His financial advisor recommends that h

Question 337162: How do you set up this word problem using I=P*R*T?
Steve has $25,000 to invest and wishes to earn an overall annual rate of return of 8%. His financial advisor recommends that he invest some of the money in a 5-year CD paying 4% per annum and the rest in a corporate bond paying 9% per annum. How much should be placed in each investment in order for Steve to achieve his goal?
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
How do you set up this word problem using I=P*R*T?
Steve has $25,000 to invest and wishes to earn an overall annual rate of return of 8%. His financial advisor recommends that he invest some of the money in a 5-year CD paying 4% per annum and the rest in a corporate bond paying 9% per annum. How much should be placed in each investment in order for Steve to achieve his goal?
-------
Interest from the CD will be P*(0.05)(5)
Interest from the bond will be p(0.09)5
Equation:
interest + interest = interest
0.05*5x + 0.09*5*(25000-x) = 0.08*5*25000
-----------------
Multiply thru by 100 to get:
5*5x + 9*5(25000-x) = 8*525000
----
25x + 45*25000- 45x = 40*25000
-20x = -5*25000
x = $6250 (amt. to invest in 5% CDs)
----
25000-x = $18750 (amt. to invest in 9% bonds
=================================================
Cheers,
Stan H.

RELATED QUESTIONS
I need help setting up an equation for a word problem and solving it. I have to use a... (answered by TutorDelphia)

Hello, word problem get me everytime. I never know how to set them up. Ash has... (answered by rfer)

I need help setting up an equation and solving it. Can you please help me? Sal has... (answered by ankor@dixie-net.com)

The question is: The amount of money A accrued at the end of t years when a certain... (answered by stanbon)

The question is: The amount of money A accrued at the end of t years when a certain... (answered by lwsshak3)

Can someone please shoe me how to do this word problem with the steps?! I am stuck!... (answered by nyc_function)

Hello, I need help with solving this word problem having to do with annual percentage... (answered by stanbon)

I NEED HELP SETTING UP THIS WORD PROBLEM: Tracy has $20,000 to invest. As her... (answered by solver91311,josmiceli)

how do i turn this word problem into a linear system of equations? and as a matrix... (answered by stanbon)