Question 1120654: A $76,000 trust is to be invested in bonds paying 8%, CDs paying 7%, and mortgages paying 10%. The bond and CD investment must equal the mortgage investment. To earn a $6670 annual income from the investments, how much should the bank invest in bonds?
Answer by greenestamps(13200)   (Show Source):
You can put this solution on YOUR website!
"The bond and CD investment must equal the mortgage investment" means half of the $76000 must be invested in mortgages. A 10% return on an investment of $38000 is $3800.
So the return on the 8% bonds and 7%CDs must be $6670-$3800 = $2870.
The remaining $38000 all invested at 7% would return $2660; all at 8% would return $3040.
Where the actual remaining return of $2870 lies between those two numbers determines the ratio in which the remaining $38000 should be invested.
3040-2660 = 380; 2870-2660 = 210
The actual amount of remaining return is 210/380 = 21/38 of the way from 2660 to 3040; that means 21/38 of the $38000 should be invested at the higher 8% rate.
So 21/38 of $38000, or $21000, should be invested in the 8% bonds and the remaining 17/38 or $17000 should be invested in the 7% CDs.
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