SOLUTION: Cassandra bought a 10−yr Treasury note that paid the equivalent of 3.5% simple interest. She invested $4000 more in a 15−yr bond earning 4.1% than she did in the Treasury note

Algebra ->  Finance -> SOLUTION: Cassandra bought a 10−yr Treasury note that paid the equivalent of 3.5% simple interest. She invested $4000 more in a 15−yr bond earning 4.1% than she did in the Treasury note      Log On


   

Question 1137046: Cassandra bought a 10−yr Treasury note that paid the equivalent of 3.5% simple
interest. She invested $4000 more in a 15−yr bond earning 4.1% than she did in the Treasury note. If the total amount of interest from these investments is $10, 180, determine the amount of principal for each investment. Assume that each investment was held to maturity.
Answer by VFBundy(438) About Me  (Show Source):
You can put this solution on YOUR website!
10-year Treasury note:
Principal = p
Rate = 0.035
Time = 10
Interest = 10(0.035p) = 0.35p

15-year bond:
Principal = p + 4000
Rate = 0.035 + 0.041 = 0.076
Time = 15
Interest = 15(0.076(p + 4000)) = 15(0.076p + 304) = 1.14p + 4560

(0.35p) + (1.14p + 4560) = 10180

1.49p + 4560 = 10180

1.49p = 5620

p = 3771.81

10-year Treasury note:
Principal = p = $3771.81

15-year bond:
Principal = p + 4000 = $7771.81