Question

Jody plans to invest a total of $7000
between two different accounts. She has
done some research and found a savings
account that will pay 2.5% interest per year
and a money market account that pays 6%
per year. If she wants to earn $385 after
one year, how much should she invest in
each account?

Answer 1

Jody plans to invest a total of $7000  between two different accounts. She needs to invest $1000 in her first account and $6000 in her second account to earn $385 after one year.

• Let denote p with the amount invested on 2.5% interest per year
• Let (7000 -p) denote the amount invested on 6% interest per year

For the first part

• 2.5% of p = 0.025p

For the second part

• 6% of (7000 - p) = 0.06(7000 - p)

The total interest is:

= 0.025p + 0.06(7000 - p)

= 0.025p + 420 - 0.06p

Since the total interest she wants to earn after one year is $385.

Then;

385 = 0.025p + 420 - 0.06p

385 - 420 = 0.025p - 0.06p

- 35 = -0.035p

p = - 35/ -0.035

p = 1000

Now;

On the first account, the amount Jody should invest in is p = $1000

On the second account, the amount Jody should invest in is:

= 7000 - p

= 7000 - 1000

= $6000

To confirm this claim,

• 2.5% of 1000 = 0.025 × 1000 = $25
• 6% of 6000   =  0.06 × 6000  = $360

                                                            $385

Therefore, we can conclude that she needs to invest $1000 in her first account and $6000 in her second account to earn $385 after one year.

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