Two mutual funds pay interest at rates that differ by 4Money

Two mutual funds pay interest at rates that differ by 4%.Money invested for one year in the first fund earns $300 interest. The same amount invested in the other fund ears $60. Find the higher rate of interest.

Solution

Let P be the amount which is invested in two mutual funds independenly, for one year is = P

Then interest earned on first fund at the rate of r% yearly

= P x r/100 = $ 300 .... (1)

The interest earned on second fund at the rate of (r-4)% yearly

= P x (r-4)/100 = $ 60 .... (2)

Dividing equation (1) by (2) we get

r / (r-4) = 300/60 = 5

or, r = 5 (r - 4) => 4r = 20

or r = 5%