Question

suppose $8000 is invested, part in stock paying 5% for 2 years and the balance in a bond paying 7% interest for 3 years. if the total interest earned in $1020, how much amount is invested at 5%? how much amount is invested at 7%?

Answer 1

Given

Rate of interest for stocks (r)=5%

Duration of investment in stock (t) =2

Rate of interest for bonds (r)=7%

Duration of investment in bonds (t)=3

Let the amount X is invested in stocks,

then amount invested in bonds=8000-X

Interest earned in stocks=Prt=X*5%*2=0.10X

Interest earned in bonds=Prt=(8000-X)*7%*3=1680-0.21X

Total interest earned=0.10X+1680-0.21X=1680-0.11X

We know that the total interest earned is $1020, So,

1680-0.11X=1020

660=0.11X

X=$6000 (amount invested in stocks @5%)

Amount invested in bonds=8000-6000=$2000 (@7%)