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Jeff opens a savings account (paying 5% interest) with $1,000 and a CD (paying 6% interest) with $2,000. After one year, how much interest does he earn?

User Dazz
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1 Answer

18 votes
18 votes

Given:

Jeff opens a savings account (paying 5% interest) with $1,000

and a CD (paying 6% interest) with $2,000.

We will find the total interest earned after one year.

We will use the following formula:


I=P\cdot r\cdot t

Where: P is the initial saving, r is the interest rate, t is the time

there are two interests earned:

The first, P = 1000, r = 5% = 0.05, t = 1

so,


I=1000\cdot0.05\cdot1=50

The second, P = 2000, r = 6% = 0.06, t = 1


I=2000\cdot0.06\cdot1=120

So, the total interest will be = 50 + 120 = 170

So, the answer will be $170

User Mlamp
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