1. Solving Investment Problems

2. Investment Problems Investment problems have three parts: 1.The principal – the amount being invested 2.The rate – the % that the money will earn 3.The income – the earnings from the investment

3. The problem Mary has just retired and has 60,000.00 available to invest. She is considering bonds at an interest rate of 13% and CD’s at an interest rate of 3%. If she wants to earn income of exactly 6,000.00 per year from these investments, how much money should she invest in each?

4. Tic – tac - toe Many problems are easiest to solve using boxes. PrincipalRateIncome Bonds CD Total

5. Fill the boxes with the information from the story. bonds at an interest rate of 13% (write the % as a decimal) PrincipalRateIncome Bonds.13 CD Total

6. Fill the boxes with the information from the story. CD at an interest rate of 3% (write the % as a decimal) PrincipalRateIncome Bonds CD.03 Total

7. Fill the boxes with the information from the story. 60,000.00 available to invest PrincipalRateIncome Bonds CD Total60,000

8. Fill the boxes with the information from the story. income of exactly 6,000.00 PrincipalRateIncome Bonds CD Total6,000

9. Tic – tac - toe This is what we already know: PrincipalRateIncome Bonds.13 CD.03 Total60,0006,000

10. Tic – tac - toe You don’t know how much was invested in bonds, so call that x. PrincipalRateIncome Bondsx.13 CD.03 Total60,0006,000

11. Be smarter than the average bear! You don’t know how much was invested in either bonds or CD’s. You know the total is 60,000 and you have called the amount invested in bonds x. If you ever manage to figure out what x is, how will you find the amount invested in CD’s? You’ll take x away from the total of 60,000. Let’s do it!

12. Tic – tac - toe Show the amount in CD’s as the total minus x PrincipalRateIncome Bondsx.13 CD60,000 - x.03 Total60,0006,000

13. Tic – tac - toe Multiply across: principal X rate = income PrincipalRateIncome Bondsx.13.13x CD60,000 - x.03.03 ( 60,000 – x ) Total60,0006,000

14. Add down You always add down because: Income from bonds + Income from CD’s _____________________ Total Income

15. Add down the last column.13x +.03(60,000 - x) = 6,000 PrincipalRateIncome Bondsx.13.13x CD60,000 - x.03.03(60,000 – x) Total60,0006,000

16. Solve the problem!.13x +.03(60,000 - x) = 6,000.13x + 1800 -.03x = 6000.10x +1800 = 6000.10x = 4200 x = 42,000 and 60,000 – x = 18,000

17. Be sure you answer the question! how much money should she invest in each? x = 42,000 and 60,000 – x = 18,000 She should invest 42,000 in bonds and 18,000 in CDs.

18. Tic-tac-toe Problems Make your boxes Fill in the information you know Use your head Multiply across Add down Solve the problem Make sure you answer the question that is being asked!