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Roberto just retired, and has $690,000 to invest. A very safe Certificate of Deposit (CD) account pays 2.5%, while a riskier bond fund pays 6% in interest. Roberto figures he needs $35,000 a year in interest to live on. How much should he invest in each account to make enough interest while minimizing his risk

Answer :

TomShelby

Answer:

It will invest $ 182,857.15 in Certificate of Deposit

and $ 507,142.85 in a bond fund

Explanation:

A+B = 690,000

A x 0.025 + B x 0.06 = 35,000

A = 690,000 - B

(690,000  -  B) x 0.025 + B x 0.06 = 35,000

17,250 - 0.025B + 0.06B = 35,000

0.035B = 35,000 - 17,250

B = 17,750 / 0.035 = 507.142,85

A = 690,000 - 507,142.85 = 182.857,15‬

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