“Sound” Investment: Figuring Out How Much You Invested Before — By Solely Looking at the Current Interest Amount

Need a dose of no-BS financial education? Here’s a good news for you. Not too long ago, we were chatting with our wildly imaginative friend and tutee Victor, who came up with the following investment question:

OK. Let’s say that a while ago, I set up a lump sum of investment with a total of \$10,000 CAD towards a Canada Savings Bond (CSB) and a Guaranteed Investment Certificate (GIC) from one of the Big Five, but because of my memory problem, I forgot what were the exact amounts I allocated to my CSB and GIC. However, since I am not totally out of my mind yet, I still remember that my bond earns at an annual interest rate of 2%, and that my GIC is a bit higher at 6%.  I also know that both of my investments are compounded daily, and payable at the end of each month.

But the question is this: Let’s say that at the end of 10 years of dedicated investment, I end up earning an interest totalling up to \$5000 CAD. Can I somehow use this information to help me recover how much I invested in CSB and GIC in the first place?

Now. That’s an excellent one! Talk about creativity here! So, what do you think? And if you just can’t wait for the answer, just read on!