Property
The formula to model interest applications is I=Prt. Interest, I, is the product of the principal, P, the rate, r, and the time, t. For one year, t=1. The system of equations comes from the Principal column and the Interest column.
{s+b=Total Principal(rates​)s+(rateb​)b=Total Interest​ Examples
- Adnan has 60,000 dollars to invest and hopes to earn 6% interest per year. He puts some money into a stock fund that earns 8% per year and the rest into bonds that earn 3% per year. Let s be the amount in stocks and b be the amount in bonds. The system is s+b=60000 and 0.08s+0.03b=0.06(60000). He should put 36,000 dollars in stocks and 24,000 dollars in bonds.
- Rosie owes 50,000 dollars on two student loans. The interest rate on her bank loan is 8.5% and the interest rate on the federal loan is 4.5%. The total interest she paid last year was 3050 dollars. Let b be the bank loan and f be the federal loan. The system is b+f=50000 and 0.085b+0.045f=3050. The bank loan is 20,000 dollars and the federal loan is 30,000 dollars.