This is a weighted average concept problem. The smart investor knows that he should not put all his eggs in one basket. In this Prof. Dallis has placed a sum of money (you need to determine how much) into three different baskets each earning a different interest rate. The amount he earns from each investment is simply the Amount invested x the Interest Rate. For example, if I invest $1000 for one year in CDs then I would earn interest of $1000 x 5% = $50. Note: Think of Interest and Dividends as a similar concept. Just add them together to determine his total return on the investments.

1. Draw the investment Picture use the data in Column A to draw a PIE CHART. Ok to do on paper or in Excel. If doing by hand, try and be close with the numbers. 2. Compute the Weighted average of the investment. The weighted average is an area concept the product of the Size of the investment x the Rate that it earns. This will give you the average rate of interest earned on all three investments. 3. Now with the average interest rate compute the total invested if the amount earned for the year was $6000 in interest and dividends. 4. Using answer 3 and the %s by category in the table what amount was invested in each basket? This total should equal the amount found in step 3

B D Type of Investment Amount of Investment Total Amount Earned from all three components. Return on that Investment- this is the Rate of interest and dividends that the investment earns 5% Interest 8% Interest 20% Dividends Bank CD's Bonds Stocks 45% 30% 25% Total of all investments 100% Find the weighted average Total $ earned on the return on all 3 investments investments was $6,000