Question

An individual invested $5,000 into two accounts. They placed part of it into an account that earned 4.5% and the rest in an account that earned 6%. The total annual income generated from this investment in simple interest was $270. How much was invested in each account?

Answer 1

Based on the total annual income from simple interest, $2000 was invested in Account 1 while $3000 was invested in Account 2.

What is simple interest?

Simple interest the amount of interest charged on a sum at a given rate and for a given period of time.

• Simple interest = Principal × rate × time

In simple interest, the principal amount is always the same.

Given that the principal is $5000

This amount was invested into two account at the following rates:

Account 1 at 4.5% interest rate

Account 2 at 6% interest rate

Total income from simple interest = $250

Let amount invested in Account 1 be y; amount invested in Account 2 will be 5000 - y

Interest on Account 1 = y × 4.5% × 1 = 0.045y

Interest on Account 2 = (5000 - y) × 6% × 1 = 300 - 0

06y

0.045 y - 0.06y + 300 = 270

-0.015 y = -30

y = 2000

5000 - y = 3000

Therefore, $2000 was invested in Account 1 while $3000 was invested in Account 2.

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