Veronica received a $50,000 insurance settlement. She invested some of the money in a bank CD that paid 3.5% annual interest and invested the rest in a stock. In one year, the stock decreased in value by 30%. If Veronica lost $1600 from her $50,000 investment, how much did she put in the bank CD?

Let the amount placed in the bank CD be x, then the amount invested in the stock would be 50,000-x .

Gains from annual interest paid on the bank deposit = 3.5/100 * x

Losses from investment in stock = 30/100 * (50,000 - x)

Since the overall net loss from both investments is $1600,

we have 30/100 * (50,000 - x) -  3.5/100 * x = 1600

15,000 - 0.3x -0.035 x =1600

15,000 - 0.335 x =1600

Rearranging the terms gives

0.335 x =13,400

Hence amount placed in the bank CD = x = 13,400/0.335 = $40,000 (shown)

Hope this helps. Peace.  


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Frederick Koh


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