Jane and Joe made two investments of $25,000 and $40,000 with different investors that yielded a combined rate of return of 10% compounded for 6 years. If the rate return on the first investment was 9%, what is the rate of return the couple obtained on the second investment?

Question

Business

Carlo Wilcox

30 June, 02:48

Jane and Joe made two investments of $25,000 and $40,000 with different investors that yielded a combined rate of return of 10% compounded for 6 years. If the rate return on the first investment was 9%, what is the rate of return the couple obtained on the second investment?

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Answers (1)

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Anika Bradley · Answer 1

10.625%

Explanation:

The combined rate of return for two investments can be calculated using the below mentioned formula:

Combined interest=[ (interest rate of first investment*first investment+interest rate of second investment*second investment) / (First investment+Second investment) ]

In the given question

Combined interest=10%

Interest rate of first investment=9%

First investment=$25,000

Interest rate of second investment=?

Second investment=$40,000

10%=[ (9%*25,000+Interest rate of second investment*$40,000) / (25,000+40,000) ]

10% = (2250+Interest rate of second investment*$40,000) / 65,000

10%*65,000=2250+Interest rate of second investment*$40,000

6500-2250=Interest rate of second investment*$40,000

4,250=Interest rate of second investment*$40,000

Interest rate of second investment=10.625%