An investor divides a total of $25,000 into two different accounts. Account A earns simple interest at a rate of 4% per year, and Account B earns simple interest at a rate of 6.5% per year. After three years, the total interest earned from both accounts is $3,975. What is the amount of money invested in Account A?
Show answer & explanation
Correct answer: D
Explanation
Given:
Total Investment = $25,000
Account A Rate = 4% per annum
Account B Rate = 6.5% per annum
Time = 3 years
Total Interest = $3975
Formula:
SI = (P × R × T) / 100
Let Investment in Account A = x
Investment in Account B = 25,000 − x
Interest on Account A = (x × 4 × 3) / 100 = 0.12x
Interest on Account B = ((25,000 − x) × 6.5 × 3) / 100
= 0.195(25,000 − x)
Total Interest
0.12x + 0.195(25,000 − x) = 3975
0.12x + 4875 − 0.195x = 3975
−0.075x = −900
x = $12000