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Hi guys,

I'm trying to help my son with this question but I just have no idea how to set it up. I know that I=prt, but I don't understand what to plug in here since we are given two bonds.

Anita Ramirez owns two bonds, one paying 8.5% interest and the other paying 9% interest. Every six months Anita receives total of $485 interest from both bonds. If the 8.5% bond is worth $4000, how much is the 9% bond worth?

Thanks,
Samina

2 answers

The semiannual interest paid on the 8.5% bond is 0.085 x 4000 x 1/2 = $170. (That factor of 1/2 is there because the payments are made twice a year.) That leaves $485 - $170 = $315 as the semiannual interest on the 9% bond. Solve for its principal, P, with the formula
0.09 x P x (1/2) = $315
P = 630/0.09 = $7000.

The last step required some algebraic manipulation that I hope you were able to follow.
what is the difference between the simple and compound semi annually interst on 250 dollars in 2 years at 14%