Investment

Question

A mother wants to invest $10000 for her children's 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 $600, how much money was invested at each rate ?

Answer 1

Hi Timarria

 

Let

C = amount invested in Bank CD @ 4%

B = amount invested in Bond @ 7%

 

From the very first sentence of the problem we know

C + B = 10000

 

Since the CD earns 4% and the bond earns 7%

.04C + .07B = 600

 

We can use substitution

if

C + B = 10000

then 

C = 10000 - B

 

So

 

.04(10000-B) + .07B = 600

 

Let's distribute and clean this up

400 - .04B + .07B = 600

.03B = 200

B = 6666.67

 

Then, since

C = 10000-B

C = 10000 - 6666.67 = 3333.33

 

$3,333.33 is invested in the CD

$6,666.67 is invested in the Bond