A Person Plans To Invest A Total Of $160,000 In A Money Market

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Question 1064947: A person plans to invest a total of $190,000 in a money market account, a bond fund, an international stock fund, and a domestic stock fund. She wants 60% of her investment to be conservative (money market and bonds). She wants the amount in domestic stocks to be 44 times the amount in international stocks. Finally, she needs an annual return of $7,600. Assuming she gets annual returns of 2.5% on the money market account, 3.5% on the bond fund, 4% on the international stock fund, and 6% on the domestic stock fund, how much should she put in each investment?
Answer by addingup(3677) (Show Source):
You can put this solution on YOUR website!
Total to invest: 190,000
60% in Money Market and Bond Funds:
190,000*0.6 = 114,000 in MM and BF
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Interest:
MM 0.025
BF 0.035
IS 0.04
DS 0.06
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MM+BF = 114,000
IS+DS = 190,000-114,000 = 76,000
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DS = 44*IS
DS+IS = 76,000
44*IS+IS = 76,000; 45IS = 76,000; IS = 76,000/45 = 1,688.89
IS = 1,688.89
DS = 44*1,688.89 = 74,311.16
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IS = 1,688.89*0.04 = $67.55  interest on International Stocks
DS = 74,311.16*0.06 = $4,458.67  interest on Domestic Stocks
Total: 67.55+4,458.67 = 4,526.22
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MM+BF = 114,000
0.025MM+0.035BF = 7,600-4,526.22 = 3,073.78
0.025x+0.035(114,000-x) = 3,073.78 = 91,622  Invested at 2.5%
114,000-91,622 = 22,378  Invested at 3.5%
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91,622*0.025 = 2,290.55 Interest from Money Market
22,378*0.035 = 783.23 Interest from Bond Funds
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Check:
67.55+4458.67+2290.55+783.23 = 7,600 Correct.
:
John