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Math Help - Investment problem

  1. #1
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    Joined
    Aug 2009
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    19

    Investment problem

    I'm having a hard time figuring out where to start on this problem.

    "If Ben invests $4000 at 4% interest per year, how much additional money must be invested at 5% annual interest to ensure that the interest he receives each year is 4% of the total amount invested?"

    Thanks for the help.
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  2. #2
    Newbie
    Joined
    Sep 2009
    Posts
    16
    Hello,

    Your question isn't as detailed as I might like, but it might have been given to you that way, so I'll work with what I have. I'm assuming that we are only worried about the first year (this problem would not have solution if we needed to get 4.5% of the total every year after considering compound interest).

    So as to how to start this, you know a few things.

    Let A represent the additonal investment, after the first 4000.

    Interest Gained = (4000 * 0.04) + (A * 0.055)
    because you gain 4% interest on the 4000 and 5.5% on the additional investment.

    Desired Interest = 0.045*(4000 + A)
    because we want to earn 4.5% of the total amount invested

    So as far as I can tell, to solve your question you need to make the interest gained equal to the desired interest and then solve for A.

    That should be a pretty good start. Let me know if you're still having trouble.
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