Interest

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talaangoshtari: Master | Next Rank: 500 Posts; Posts: 154; Joined: Wed May 21, 2014 4:29 amFollowed by: 1 member; Thanked: 8 times

by talaangoshtari » Thu Jun 04, 2015 9:40 pm

A sum of money amounts to $49440 in three years and $50400 in five years at the same interest rate. Find the rate of interest per annum.

A.8
B.9
C.10
D.11
E.12

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Source: Beat The GMAT — Problem Solving | Thu Jun 04, 2015 9:40 pm

DavidG@VeritasPrep: Legendary Member; Posts: 2663; Joined: Wed Jan 14, 2015 8:25 amFollowed by: 128 members; Location: Boston, MA; Thanked: 1153 times; GMAT Score:770

by DavidG@VeritasPrep » Fri Jun 05, 2015 6:04 am

A sum of money amounts to $49440 in three years and $50400 in five years at the same interest rate. Find the rate of interest per annum.

A.8
B.9
C.10
D.11
E.12

Are you sure you've transcribed this question correctly?

If your principal at the end of Year 3 were 49,440, and you earned 8% interest that year, your principal at the end of Year 4 would already exceed 50,400.

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GMATGuruNY: GMAT Instructor; Posts: 15539; Joined: Tue May 25, 2010 12:04 pmFollowed by: 1906 members; Location: New York, NY; Thanked: 13060 times; GMAT Score:790

by GMATGuruNY » Fri Jun 05, 2015 6:09 am

talaangoshtari wrote:A sum of money amounts to $49440 in three years and $50400 in five years at the same interest rate. Find the rate of interest per annum.

A.8
B.9
C.10
D.11
E.12

The problem should make it clear that interest accrues ONLY on the original investment.

(amount after 5 years) - (amount after 3 years) = 50400 - 49440 = $960.
Since $960 is earned in the 2 years between the 3rd and 5th years, the amount of interest earned each year = 960/2 = $480.
Since the account contains $49440 after earning $480 per year for 3 years, the original investment = 49440 - (3*480) = 48000.
Since $48000 earns $480 each year, the annual interest rate is [spoiler]1%[/spoiler].

The correct answer is not among the 5 options.
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talaangoshtari: Master | Next Rank: 500 Posts; Posts: 154; Joined: Wed May 21, 2014 4:29 amFollowed by: 1 member; Thanked: 8 times

by talaangoshtari » Fri Jun 05, 2015 6:23 am

Hi GMATGuruNY,

I found this problem on the internet, but the question was without answer choices. I wrote the answer choices. Actually, I thought the correct answer is 10...

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Brent@GMATPrepNow: GMAT Instructor; Posts: 16207; Joined: Mon Dec 08, 2008 6:26 pmFollowed by: 1268 members; Location: Vancouver, BC; Thanked: 5254 times; GMAT Score:770

by Brent@GMATPrepNow » Fri Jun 05, 2015 7:05 am

Even if we ignore the answer choices, we still need to know whether we're talking SIMPLE interest or COMPOUND interest.

Cheers,
Brent

Brent Hanneson - Creator of GMATPrepNow.com

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