Sue a recent retiree requires 6000 per year in extra income

Sue, a recent retiree, requires $6,000 per year in extra income. She has $50,000 to invest and can invest in B-rated bonds paying 15% per year or in a certificate of deposit (CD) paying 7% per year. How much money should be invested in each to realize exactly $6,000 in interest per year?

Solution

Total amount to be invested = $50,000

Let the amount invested in bonds = $x

Interest in 1 yr = (x*15*1)/100 = 0.15x

amt invested in CD = 50000 -x

Interest in 1 yr = ( 50000 -x)*7/100 = 3500 - 0.07x

Total interest in 1 yr = 0.15x + 3500 - 0.07x = 3500 - 0.08x

Required income $ 6000 annually

So, 3500 - 0.08x = 6000

0.08x = 2500

x = $31250

So, amt invested in bonds = $ 31250

amt invested in CDs =$18750