Question

Two certificates of deposit pay interest at rates that differ by 4%. Money invested for one year in the first CD earns $175 interest. The same principal invested in the other CD earns $315. Find the two rates of interest.

Answer 1

We are told that the principle is the same for both investments so we can say:

315=P(r+4)/100 and 175=Pr/100 solving both for P you have:

P=31500/(r+4) and P=17500/r since P=P:

17500/r=31500/(r+4)

175(r+4)=315r

175r+700=315r

-140r+700=0

-140r=-700

r=5

So the rates are 5% and (5+4)=9%

check...

P(9/100)=315  and P(5/100)=175

P=31500/9 and P=17500/5

P=157500/45 and P=157500/45

So P=P

note:  P=$3500

3500(9/100)=$315

3500(5/100)=$175