A local credit union offers a certificate of deposit CD that

A local credit union offers a certificate of deposit (CD) that returns 2% interest on a money market fund that returns 3% interest. Over the next year, a creidt union customer wants to earn $263.50 in interest on an investment of $10,000 between a CD and a money market fund.

How much money will the customer need to inves in the CD?

What formula would you use for this problem and what would the answer be.

Solution

let X be the amount be invested in CD and Y be invested in market fund.

we know X+Y = 10,000 ------> 1

Interest on CD investments is 2% , so amount earned in a year = 0.02*X

Interest on Markect fund investement is 3% , so amount earned = 0.03*Y

Total interest earned => 0.02X+0.03Y = 263.50 --->2

We need to solve equations 1 and 2.

multiply 2 by 100

2X+3Y = 26350----3

multiply 1 by 3

3X-3Y = 30000 ---4

eq4-eq3

X = 3650

so amount invested in CD is $3650 /-

Formula used = Interes = pnr/100 p- principal, n = number of year, r = rate of interest.