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A mother wants to invest $11,000.00 for her son's future education She invests a portion of the...

Question:

A mother wants to invest $11,000.00 for her son's future education She invests a portion of the money in a bank certificate of deposit (CD account) which earns 4% and the remainder in a savings bond that earns 7%.

The total interest earned after one year is $660.00.

How much money was invested in the CD account? $_____

(Round to the nearest cent, if necessary.)

Commercial deposits

Commercial deposits or CD are the short term debt instrument issued by an organization, the period is generally less than a year. Interest on CD are generally charged on the basis of simple interest system.

Answer and Explanation:

Let the amount invested in CD = X

Let the amount invested in Savings deposits (SD) = Y

We have

X+Y = 11000 ....... .. . ....... (1)

Interest in one year = invested amount * interest rate

Interest on CD = .04X

Interest on SD = .07Y

Therefore

.04X+.07Y= 660..........(2)

From (1)

Y= 11000 - X...........(3)

Using 3 and 2

.04X + .07(11000-X) =660

.04X + 770 -.07X =660

-.03X = -110

X = the money invested in CD = $3667


Learn more about this topic:

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How to Calculate Interest Expense: Formula & Example

from Financial Accounting: Help and Review

Chapter 5 / Lesson 18
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