Question 659201: An algebra student has won $500,000 in a lottery and wishes to deposit it in savings accounts in two financial institutions. One account pays 4% simple interest, but deposits are insured only to $250,000. The second account pays 3.2% simple interest and deposits are insured up to $500,000. Determine whether the money can be deposited so that it is fully insured and earns annual interst of $18500
Answer by colliefan(242)   (Show Source):
You can put this solution on YOUR website! We will make the most interest where we get 4% and so should put as much money as possible ($250,000) into that account. Then, the remainder will go into the other account. If we do this, the following is the calculation of the simple interest:
Higher interest account:
250,000*4% = 250,000*.04 = $10,000
The other half would go to the other account:
250,000*3.2% = 250,000*.032 = $8,000
This keeps it fully-insured, but earns only $18,000.
(Of course it doesn't earn $18,500 in the first year, but would in further years.)
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