Chapter ISG, Problem 5.4.2.5P

To determine

To calculate amount invested in stock.

Answer to Problem 5.4.2.5P

   Minimum amount invested in stock is $20,000

Maximum amount invested in stock is $30,000

Explanation of Solution

Given information:

R invested $50,000 in two options

Option 1 is the money market account that pays 4% simple interest

Option 2 is the stock that pays 24% simple interest

Total amount of both investment after one year at least $56000 and not more than $58000.

Formula used:

   Where

P is principle r is rate of interest t is time A is amount

Calculation:

Let x be the amount invested in stock

Then, the amount invested in money market account 50000- x

Option 1

P=50000-x

r=4%

t=1

Using formula to calculate the amount in option 1 after one year

  

On solving,

  

Option 2

P=x

r=24%

t=1

Using formula to calculate the amount in option 2 after one year

   On solving,

  

Total amount of both investment after one year at least $56000 and not more than $58000.

Then,

  

On solving,

  

On solving,

  

On solving,

  

Substracting 52000 all sides of compount inequality

  

On solving,

  

Multiply both sides by 5

   Minimum amount invested in stock is $20,000

Maximum amount invested in stock is $30,000