Can someone please help me ??

Question

You have $250000 in an RRSP (Registered Retirement Savings Plan) at the time you retire. You have the option of investing this money in two funds: Fund A pays 5.15.1% annually and Fund B pays 7.67.6% annually. How should you divide your money money between Fund A and Fund B to produce an annual interest income of $14000?

1142 views around the world

You can reuse this answer
Creative Commons License

Answer 1 · 2018-01-28T02:06:15

Deposit $200 000 at 5.1% and 50 000 at 7.6%

We will split the $250 000 into two parts: #x# and #250 000-x#

#x# will be deposited at 5.1%, and the rest at 7.6%

This way, our total interest will be

#(x) xx0.051+(250 000 - x)xx0.076 = 14000#

Now, solve for #x#:

#0.051x + 250 000(0.076) - 0.076x = 14 000#

#0.051x + 19000 - 0.076x = 14 000#

Collect like terms

#-0.025x + 5000=0#

#0.025x = 5000#

#x# = 5000/0.025= 200 000

Deposit $200 000 at 5.1% and 50 000 at 7.6%