Question 1
Two investment accounts earn different annual interest rates. Account A earns 4% annually and Account B earns 6% annually. An investor places a total of 25000intheseaccountsandearns1180 in interest after one year. If the investor wants to redistribute the funds to earn exactly $1300 in interest next year while keeping the same total investment, how much additional money needs to be moved from Account A to Account B?
- $2000 needs to be moved from A to B
- $3000 needs to be moved from A to B
- $4000 needs to be moved from A to B
- $6000 needs to be moved from A to B (correct answer)
Explanation: First, find the current distribution. Let x = amount in Account A, y = amount in Account B. We have x+y=25000 and 0.04x+0.06y=1180. From the first equation, y=25000−x. Substituting: 0.04x+0.06(25000−x)=1180, so 0.04x+1500−0.06x=1180, giving −0.02x=−320, so x=16000 and y=9000. For the new target of 1300, let $$x'$$ and $$y'$$ be the new amounts. We need $$x' + y' = 25000$$ and $$0.04x' + 0.06y' = 1300$$. Solving: $$y' = 25000 - x'$$ and $$0.04x' + 0.06(25000-x') = 1300$$, so $$0.04x' + 1500 - 0.06x' = 1300$$, giving $$-0.02x' = -200$$, so $$x' = 10000$$ and $$y' = 15000$$. The change is from 16000 to 10000inAccountA,so6000 moves from A to B.