Question

A $8,000 principal is invested in two accounts, one earning 1% interest and another earning 6% interest. If the total interest for the year is $405, then how much is invested in each account?

Answer 1

The amount invested in the first account is $1,500 and $6,500 was invested in the second account.

What is simple interest?

Simple interest is determined as the principal multiplied by the interest rate ,then multiplied by the duration of the investment.

The formula for simple interest on an investment is as shown below:

I=PRT

P=principal=$8,000

R=interest rates= 1% and 6%

T=duration of investment=1 year

Let assume that X was invested at 1% and that the remaining of $8000-X is invested at 6%.

Interest on the first account=X*1%*1

Interest on the first account=0.01X

Interest on second account=($8000-X)*6%*1

Interest on second account=480-0.06X

Total interest=0.01X+480-0.06X

Total interest=480-0.05X

Total interest=$405

405=480-0.05X

0.05X=480-405

0.05X=75

X=75/0.05

X=amount invested in the first account=$1,500

Amount invested in the second account=$8000-X

Amount invested in the second account=$8,000-$1,500

Amount invested in the second account=$6,500

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