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Being Interested in Earning Interest

Earning interest on money invested is of utmost importance to the wise investor. Some funds pay a higher rate of interest but may be a bit risky. To offset the risk, the shrewd investor puts some money in a high-risk fund and the rest in a fund that doesn t pay as well but one that can be trusted to give a return and not lose any of the investment. [Pg.198]

The problems in this section assume the use of the simple-interest formula, compounded annually. In actuality, financial institutions use compound interest and computer programs to figure out these problems. But you get a good idea of how it works — and a pretty good estimate of the actual answer using the less complex simple-interest formula. [Pg.198]

The simple-interest formula says that the interest earned, I, is equal to the amount invested (principal), p, times the percentage rate, r, written as a decimal, times the number of years (time), t. The formula is I = prt. [Pg.198]

The Problem Robert has 50,000 to invest. He wants to put some of this money in an account that earns 8 percent interest and the rest in a riskier account that promises to earn at the rate of 12 percent. He needs yearly earnings of a total of 4,500. How much of his 50,000 should he invest in each account  [Pg.198]

Write an equation in which the first interest plus the second interest is equal to 4,500. The first interest and second interest are expressions that you write using the interest formula. This is another quality times quantity situation. Let x represent the amount of money invested in the first account and 50,000 - x be the amount of money in the second account. Assume that the time is one year. Then solve for x. [Pg.199]


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