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You invested $22,000 in two accounts paying 7% and 9% annual interest, respectively. If the total...

Question:

You invested $22,000 in two accounts paying 7% and 9% annual interest, respectively. If the total interest earned for the year was $1780, how much was invested at each rate?

The average rate of interest

When interest is calculated for multiple sources we use average interest which is the weighted average of individual interest rates.

Answer and Explanation:

Interest = Amount * rate of interest

Let X be the amount invested at 7%

Let Y be the amount invested at 9%

So 0.07 X + 0.09Y = 1,780 ------------------ (1)

also X + Y = 22,000

i.e. X = 22,000 - Y

substituting this in equation 1

0.07 (22,000 - Y) + 0.09 Y = 1,780

so Y = $ 12,000

so X = $ 10,000


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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