an algebra student won $115,000 in a lottery and wishing to deposit it in savings accounts in two financial institutions. One account pays 7.9% simple interest but only insures $60,000. The second account pays 6.9% simple interest and deposits are insured up to $100,000. Determine the maximum amount of annual interest the student can earn while keeping all money insured.

Question

an algebra student won $115,000 in a lottery and wishing to deposit it in savings accounts in two financial institutions.  One account pays 7.9% simple interest but only insures $60,000.  The second account pays 6.9% simple interest and deposits are insured up to $100,000.  Determine the maximum amount of annual interest the student  can earn while keeping all money insured.

drwls · Answer

Put the maximum insured amount (60,000) in the bank paying the higher interest, and the remainder in the other bank. 7.9% x 60,000 + 6.9% x 55,000 = $8535. All money and earnings will be insured.