Problema Solution
Two bond funds pay interest at rates that differ by 2%. Money invested for one year in the first fund earns $605 interest. The same amount invested in the other fund earns $715. Find the lower rate of interest
Answer provided by our tutors
let
r = the lower rate as a decimal, r>0
r + 0.02 = the higher rate as a decimal
P = the money invested
Money invested for one year in the first fund earns $605 interest:
r*P = 605
P = 605/r
The same amount invested in the other fund earns $715:
(r + 0.02)*P = 715
plug P = 605/r into the last equation:
(r + 0.02)(605/r) = 715
by solving we find:
r = 0.11
click here to see the step by step solution of the equation:
the lower rate of interest is 0.11 or 11%.