Question

Two bond funds pay interest at rates that differ by 4%. Money invested for one year in the first fund earns $550 interest. The same amount invested in the other fund earns $770. Find the lower rate of interest. _________ %

Answer 1

10% interest.

Explanation:

Interest I = PRT/100

If the rate R = x% we have

550 = P*x *1 / 100

and

770 = P*(x + 4) * 1 / 100

so From first equation

Px = 55000 and from the second

Px + 4P = 77000

So Px = 77000 - 4P

Therefore 77000 - 4P = 55000

4P = 22000

P = 5,500

So x = 55000/5500 = 10%.

And the rate for the other fund is 10 + 4 = 14%.