You decide to invest some money in two different money market accounts. One acco

Question

You decide to invest some money in two different money market accounts. One account account A) pays xinterest. The other account (account B) pays only interest but offers a S20 bonus for signing up for the account paid at the end of the two year period. Wite an expression for each account to determine the amount of interest (and bonus) you would earn after two yean. Use y to represent interest (and bonus) and x to represent the principle invested. Label each equation. Hint: This should be fairly simple if you know the formula for simple interest!

Explanation / Answer

Simple interest on a principle is calculated by

Total Amount = x(1+rt)

where P is the principal invested for time t at rate of interest = r %

So, for account A

So, interest accrued for A account would be

x*3*2/100 = y

so, y = 3x/50

For account B

y = x*2*2/100 + $20

So, y = 20 + x/25

solving the equations by substitution

20 + x/25 = 3x/50

20 = x/50

so, x = 1000$

therefore y would be

y= 3*1000/50 = $60

So, solution pair is (1000,60)

To have same ampount in each account, x must be

x*(1+3*2/100) = x(1+2*2/100) +20

1.06x = 1.04x + 20

0.02x = 20

so, x = 1000$

So, after two years account A will have interest as

1000*3*2/100 = $40

and account B will have interest + bonus as

1000*2*2/100 + 20 = $60

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