Basics of Investing

Archive for March, 2006

Question: simple systems of equations problem?

can some one explain to me the two equations used in this problem and how to set them up?

A lottery winner is going to invest in utility bonds and a savings account using the following data:
Assume that her total winnings are $ 700000, that the utility bonds will pay 3 percent per year,
and that the savings account will pay 2 percent per year.

How much should she allocate to each investment
in order for the yearly incomes from them to be the same?

Utility Bonds: $
Savings Account: $

What will be her total yearly income from these investments?

thank you!!

Answer: Divide the amount into “x” and “700000 – x”

Then you want
0.03 x = 0.02 (700000 – x)

Multiply by 100
3 x = 2 (700000 – x)
3x = 1.4 million – 2x
5x = 1.4 million

x = 280000
700000 – x = 420000

To check,
.02 * 420000 = 8400
.03 * 280000 = 8400

Income = 8400 + 8400 = 16800

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