Suppose you have $5000 to invest. A certificate of deposit (CD) earns 6% annual interest, while bonds, which are more risky, earn 8% annual interest. You decide to invest $2000 in a CD and the rest in bonds. How much interest will you have earned at the end of one year?
If you have $5000 and you invest $2000 in a certificate of deposit, you have $3000 invested in the bonds. Each earns an annual interest of 6% and 8%, respectively. The total interest is shown below,
($2000) x 0.06 + ($3000) x 0.08 = $360
Thus, the amount of the total interest is $360.