 Business
27 January, 21:34

# Abe and Bea each have some money to invest in a CD (Certificate of Deposit). Abe has \$5,000 and Bea has \$20,000. Both are interested in making a 6-month investment at Synchrony Bank. The CD rates for Synchrony Bank (as of July 8, 2015) are as listed below. With 0.41% interest, Abe would get \$5,010 in six months. With 0.50% interest, Bea would get \$20,050 at the end of six months. If they pool their funds, they will be able to purchase a \$25,000 CD, which pays a higher interest rate. The 0.60% interest will return \$25,075 at the end of six months. Obviously, Abe gets back his \$5,000 principle, and Bea gets back her \$20,000 principle. How should the \$75 interest be divided between the two of them

+1
Answers (1)
1. 27 January, 23:25
0
Abe = \$17.5

Bae = \$57.5

Explanation:

Abe's principle = \$5,000

Bea's principle = \$ 20,000

Abe individual investment yield at 0.41% = (5010-5000) = \$10

Bae's individual investment yield at) 0.50% = (20000-20050) \$50

Combined investment yield at 6 % = (25,075 - (20,000+5000) = \$75

Extra interest yield = (75 - (50+10) = \$15

The extra interest yield of \$15 should be shared equally among Abe and Bae as a result of joint effort

= 15/2 - \$7.5

Therefore, the \$75 interest is shared as below

Abe = \$10 (interest on individual principle) + \$7.5 = \$17.5

Bae = \$50 (interest on individual principle) + \$7.5 = \$57.5
Know the Answer?