A small construction company has 170000 set aside in a capit

A small construction company has $170,000 set aside in a capital improvement fund to purchase new equipment. If $16,000 is invested at 28%, $30,000 at 15%, and the remaining $124,000 at 23% per year, what is the overall rate of return on the entire $170,000?

Solution

Here individual investment should be multiplied by corresponding weight and then all such multiplied figures should be added to get the overall rate of return.

Investment, $

Weight (W)

Rate (R), %

W × R

16000

16000/170000 = 0.09

28

0.09 × 28 = 2.52

30000

30000/170000 = 0.18

15

0.18 × 15 = 2.70

124000

124000/170000 = 0.73

23

0.73 × 23 = 16.79

Total = 170000

1

22.01

Answer: The overall rate is 22.01%.