Question

A total of $46,000 is invested in two corporate bonds that pay 6.75% and 7.25% simple interest. The investor wants an annual interest income of $3245 from the investments. What is the most that can be invested in the 6.75% bond?

Answer 1

Answer:

The most to be invested in Bond X (pays 6.75%) is $18,000

Explanation:

Hi, first, we have to set 2 equations. Let "X" be the bond that returns 6.75% and "Y" the bond that returns 7.25%.

$X+Y=46,000$

We also know that from both investments, the investors want $3,245, therefore:

$0.0675X+0.0725Y=3,245$

Now, we substitute Y for 46,000-X

and this is what we get.

$0.0675X+0.0725(46,000-X)=3,245$

$0.0675X+3,335-0.0725X=3,245$

$-90=-0.005X$

$X=\frac{90}{0.005} =18,000$

So, the most that can be invested in the 6.75% bond is $18,000

Best of luck.