Mr. Baker, who owns a bookstore in Manhattan, invested $40,000 in a corporate bond that assured a minimum return equivalent to an interest rate of 4.25% compounded annually. As the index was good that year, Mr. Baker got double the minimum interest rate. Find the amount of interest earned if Mr. Baker invested the sum for exactly one year.

The minimum interest rate is 4.25% and because the index was good, the actual interest rate earned was double that, which is 8.5%. Since the investment is for exactly one year, the compound interest formula gives the interest as the principal multiplied by the rate. The interest earned is 40000 times 0.085, which equals 3400.

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