Question

Please help!Your fixed expenses are $1,151.65/month. You saved 4 months' worth in an emergency fund, investing 25% in a savings account at a 3.3% APR and the rest in a 60-day CD at a 4.3% APR. How much total interest accrues over 60 days?

$43.38


$30.67


$32.23


$41.04

Answer 1

4 x 1,151.65 = 4,606.60
This is invested in two accounts. Twenty-five percent is invested in savings (4,606.60 x 25% = 1,151.65). The remainder is invested in a CD (4,606.60 - 1,151.65 = 3,454.95)

Interest accrued for savings. *Note: The interest rates given are for a full year, but you want to calculate interest for only 60 days.
1,151.65 x 0.033 x 60/360 = $6.33
Interest accrued for CD
3,454,95 x 0.043 x 60/360 = $24.76
Total interest accrued
6.33 + 24.76 = $31.09

Note: 0.033 and 0.043 = 3.3% and 4.3%. Also, the 360 day year is normally used when doing these types of problems.