Question about interest rates

Question

A mother wants to invest $13,000.00 for her son’s future education. She invests a portion of the money in a bank certificate of deposit (CD account) which earns 4% and the remainder in a savings bond that earns 7%. If the total interest earned after one year is $780, how much money was invested in the cd account

Answer 1

Hi John,

 

Let x = the amount invested in the CD

 

then 13000-x = amount invested in the savings bond

 

 

and we know the interest for each investment type and the total interest so we can form the following equation

 

 

$780 = 4% (amount in CD) + 7% (amount in bond)

 

780 = .04 x + .07 (13000-x)

 

780 = .04x + 910 - .07x

 

780 = -.03x = 910

 

-130 = -.03x (subtract 910 from both sides

 

4333.33 = x  (divide both sides by .03 and this is the amount in the CD

 

13000-x = 8666.67  (the amount in the bond

 

Hope this helps,

Tom