Question

Sal Boxer decided to divide a gift of $5000 into two different accounts. He placed $1000 in an account that earns an annual simple interest rate of 5.5%. The remaining money was placed in an account that earns an annual simple interest rate of 5.75%. How much interest will Sal earn from the two accounts after one year?

Answer 1

To answer this question we will use the following formula for annual simple interest:

`A=P(1+rt),`

where P is the initial amount, r is the annual interest rate, and t is the time in years.

Now, if he invested $1000 in a 5.5% interest account, then after 1 year he will earn:

`A_1=1000(1+0.055*1)=1055.`

Since he invested the remaining ($4000) in a 5.75% interest account, he will earn:

`A_2=4000(1+0.0575*1)=4230.`

Then, after one year he will have a total of $4230+$1055=$5285, therefore he will gain $285.

Answer: $285.