Interest

Joy Shaha wrote:Q. The annual interest rate earned by an investment increased by 10 percent
from last year to this year. If the annual interest rate earned by the
investment this year was 11 percent, what was the annual interest rate last
year?

A) 1% B) 1.1% C) 9.1% D) 10% E) 10.8%

Rate this year = Rate last year + 10%

=> 11% = 100% of Rate last year + 10% of Rate last year

=> 11% = 110% of Rate last year

=> Rate last year = (11/110)*100% = 10%.

Answer: D

-Jay
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Note that this question has a classic trap! If you found yourself saying "11 - 10 = 1, so the answer is A," you fell for the trap.

Here's a rule of thumb that I give my students: There's no such thing as a ONE-MOVE answer! Any answer that you get to by doing one simple bit of arithmetic (e.g. just subtracting 2 numbers, as above) is almost certainly a trap answer. Trust your instincts if you think "hm, that was too easy." Reread the question and see if you missed something.