# After graduation, you start working as the financial officer for a start up non government organization helping street children...Your organization has received a donation of 20 million...

After graduation, you start working as the financial officer for a start up non government organization helping street children...

Your organization has received a donation of 20 million pesos from a philanthropist. If your institution needs 500,000 PHP annually for operating expenses, how much of the donation will you invest in mutual funds and treasury bills if they respectively earn 3% and 2% annually. Solve using two variables. (Assume the money has to be invested in both types of investment for security reasons).

Use the format Given, required, solution, checking, and final answer.

thilina-g | College Teacher | (Level 1) Educator

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Given:

Total amount of money = 20000000

The interest needed annually = 500000

The annual interest rate in mutual funds = 3%

The annual interest rate in treasury bills = 1%

Required:

The fraction of donation to be invested in each investment method.

Solution:

Let the fraction of donation which is to be invested in mutual funds be P and the other fraction be Q.

Then P + Q = 1 -------> Equation 1

The amount to be invested in mutual funds = 20000000 * P

The amount to be invested in treasury bills = 20000000 * Q

The annual interest from mutual funds  = `20000000*P*(3/100)`

= 600000P

The annual interest from treasury bills  = 20000000*Q*(2/100)

= 400000Q

But we know the total interest should be 500000.

Therefore,

600000P + 400000Q = 500000  --------Equation 2

Solving equation 1 and equation2 would give you,

P =  0.5   and Q = 0.5

The fractions to be invested in mutual funds are 1/2 and in treasury bill is 1/2.

Therefore, exactly half of the donation should go to mutual funds and other half should go to treasury bills.

Checking:

The amount to be invested in mutual funds = 20000000 * 0.5

= 10000000

The interest from mutual funds                  = 10000000 * (3/100)

= 300000

The amount to be invested in treasury bills = 20000000 * 0.5

= 10000000

The interest from treasury bills                  = 10000000 * (2/100)

= 200000

The total interest is = 300000+200000 = 500000

Half (1/2) of the donation that is 10 million should be invested in mutual funds and other half that is 10 million should be invested in treasury bills.