Solve the Problem. -Don James Wants to Invest $59,000 to Earn $6170 Per

question 80

Multiple Choice

Solve the problem.
-Don James wants to invest $59,000 to earn $6170 per year. He can invest in B-rated bonds paying 13% per year or in a Certificate of Deposit (CD) paying 7% per year. How much money should be invested in each to realize exactly $6170 in interest per year?

• A)$25,000 in B-rated bonds and $34,000 in a CD
• B)$35,000 in B-rated bonds and $24,000 in a CD
• C)$24,000 in B-rated bonds and $35,000 in a CD
• D)$34,000 in B-rated bonds and $25,000 in a CD

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Definitions:

Financing Activities

Transactions involving issuing debt, equity, and paying dividends as reflected in a company's cash flow statement, indicating the flow of cash between a company and its owners and creditors.

Statement of Cash Flows

A document that illustrates the influence of balance sheet modifications and revenue on the availability of cash and equivalents, categorized by activities related to operating, investing, and financing.

Par Value

The face value of a bond or stock as stated by the issuing company, often used as an accounting standard or a minimum value.

Common Stock

A type of equity ownership in a corporation, representing a claim on part of the company's earnings and assets, with voting rights on corporate matters.