UNO High School Problem of the Week Competition
Problem 7
The director for a company's trust fund is investing $200,000. According to company policy, both a CD ( Certificate of Deposit ) and a bond must be used. The CD returns 4% per year and the bond returns 8% per year. If the company would like the trust fund to yield $10,000 dollars per year, how much money should the director invest in the CD and how much should the director invest in the bond?
Solution
Let x be the amount of money that the director must invest in the cd and let y be the amount of money that the director must invest in the bond.
We know that x + y = 200,000
We also know that .04x + .08y = 10,000.
We can substitute x = 200,000 - y into the second equation to get:
.04(200,000 - y) + .08y = 10,000
Solving for y, we get y = 50,000
Substituting into the first equation we find that x = 150,000
The director must invest 50,000 in the bond and 150,000 in the cd.
