SOLUTION: A retiree divides his pension portfolio of $270,000 between a conservative mutual fund paying at a rate of 4% and high risk bonds paying at a rate of 8%. Both investments pay the s
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Question 13261: A retiree divides his pension portfolio of $270,000 between a conservative mutual fund paying at a rate of 4% and high risk bonds paying at a rate of 8%. Both investments pay the same amount of interest anually. How much is invested in each investment? Answer by Earlsdon(6294) (Show Source):
You can put this solution on YOUR website! Let x = the amount invested the mutual fund @ 4% per annum.
Then $270,000.00 - x is invested in the "junk" bonds @ 8% per annum.
Since the annual interest is the same for both of these investments, then you can write:
Simplify and solve for x. Add 0.08x to both sides. Divide both sides by 0.12
The retiree has $180,000.00 invested in the mutual fund @ 4% per annum and
$270,000.00 - $180,000.00 = $90,000.00 invested in "junk" bonds @ 8% per annum.
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