Question

The community Relief Charity Group is earning 2.5% simple interest on the $2200 it invested in a savings account. It also earns 4.6% simple interest on an insured bond fund. The annual interest earned from both accounts is $308. How much is invested in the insured bond fund?

Answer 1

$5,500 was invested in the insured bond fund

Explanation:

First, let us calculate the interest earned on savings account

Simple interest = principal × rate × time

where:

principal = $2,200

rate = 2.5% = 2.5/100 = 0.025

time = 1 year

∴ simple interest = 2200 × 0.025 × 1 = $55

Total annual interest earned = interest earned from savings account + interests earned on insured bond fund = $308

∴ 308 = 55 + interests earned on insured bond fund

∴ interests earned on insured bond fund = 308 - 55 = $253

Finally, we know the simple interest earned on insured bond fund, the amount invested (principal) is calculated as follows:

simple interest = principal × rate × time

where:

simple interest = $253

rate = 4.6% = 0.046

time = 1 year

∴ 253 = principal × 0.046 × 1

253 = principal × 0.046

∴principal = 253 ÷ 0.046 = 5500

Therefore $5,500 was invested in the insured bond fund