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100 points for $49 worth of Veritas practice GMATs FREE VERITAS PRACTICE GMAT EXAMS Earn 10 Points Per Post Earn 10 Points Per Thanks Earn 10 Points Per Upvote ## simple interest rate ##### This topic has expert replies Senior | Next Rank: 100 Posts Posts: 53 Joined: 28 May 2014 Followed by:1 members ### simple interest rate by datonman » Sat Jun 21, 2014 4:36 pm A sum of$16,000 amounts to $18,400 in two years according to simple interest. What is the rate of interest? 1.) 6% 2.) 6.5% 3.) 7.5% 4.) 8% ### GMAT/MBA Expert GMAT Instructor Posts: 14498 Joined: 08 Dec 2008 Location: Vancouver, BC Thanked: 5254 times Followed by:1262 members GMAT Score:770 by Brent@GMATPrepNow » Sat Jun 21, 2014 5:03 pm datonman wrote:A sum of$16,000 amounts to $18,400 in two years according to simple interest. What is the rate of interest? 1.) 6% 2.) 6.5% 3.) 7.5% 4.) 8% With simple interest, one's investment increases the SAME AMOUNT each year, based on the INITIAL investment.$18,400 - $16,000 =$2400
So, the investment increased $2400 over 2 YEARS$2400 Ã· 2 = $1200 So, the ANNUAL increase is$1200

The INITIAL INVESTMENT was $16,000$1200/$16,000 = [spoiler]7.5%[/spoiler] Cheers, Brent Brent Hanneson - Creator of GMATPrepNow.com Use my video course along with Beat The GMAT's free 60-Day Study Guide Watch these video reviews of my course And check out these free resources Senior | Next Rank: 100 Posts Posts: 53 Joined: 28 May 2014 Followed by:1 members by datonman » Sat Jun 21, 2014 5:21 pm This looks very helpful. Thank you. The one method I tried to do. Emphasis on the word 'tried,' is that i was trying to use the formula. A=P +I or Amount = Principal + Interest I tried to use A = P(1+RT/100) and just plug in the info from the question. I wonder what I did wrong. ### GMAT/MBA Expert Elite Legendary Member Posts: 10346 Joined: 23 Jun 2013 Location: Palo Alto, CA Thanked: 2867 times Followed by:503 members GMAT Score:800 by Rich.C@EMPOWERgmat.com » Sat Jun 21, 2014 5:57 pm Hi datonman, The two interest rate formulas that the GMAT could test you on are: 1) Simple Interest: Principal x (1 +rt) 2) Compound Interest: Principal x (1 + r)^t In both formulas.... "Principal" represents the initial investment "r" represents the interest rate, as a decimal "t" represents the number of years Given the information in this question, we'd use the Simple Interest Formula and plug in the values that we're given: 16,000 x (1 + r(2)) = 18,400 (1 + 2r) = 18,400/16,000 (1 + 2r) = 184/160 (1 + 2r) = 23/20 (1 + 2r) = 1.15 2r = 0.15 r = .075 Final Answer: [spoiler]7.5% or answer #3[/spoiler] GMAT assassins aren't born, they're made, Rich ### GMAT/MBA Expert GMAT Instructor Posts: 14498 Joined: 08 Dec 2008 Location: Vancouver, BC Thanked: 5254 times Followed by:1262 members GMAT Score:770 by Brent@GMATPrepNow » Sat Jan 13, 2018 6:40 am datonman wrote:A sum of$16,000 amounts to $18,400 in two years according to simple interest. What is the rate of interest? 1.) 6% 2.) 6.5% 3.) 7.5% 4.) 8% With simple interest, one's investment increases the SAME AMOUNT each year, based on the INITIAL investment.$18,400 - $16,000 =$2400
So, the investment increased $2400 over 2 YEARS$2400 Ã· 2 = $1200 So, the ANNUAL increase is$1200

The INITIAL INVESTMENT was $16,000$1200/$16,000 = 7.5% Cheers, Brent Brent Hanneson - Creator of GMATPrepNow.com Use my video course along with Beat The GMAT's free 60-Day Study Guide Watch these video reviews of my course And check out these free resources ### GMAT/MBA Expert GMAT Instructor Posts: 1460 Joined: 09 Apr 2015 Location: New York, NY Thanked: 39 times Followed by:20 members by Jeff@TargetTestPrep » Wed Jan 24, 2018 9:42 am datonman wrote:A sum of$16,000 amounts to $18,400 in two years according to simple interest. What is the rate of interest? 1.) 6% 2.) 6.5% 3.) 7.5% 4.) 8% The amount of interest earned is 2,400. Using the formula for simple interest I = P x r x t, where I = interest, P = principal, r = rate, and t = time, we have: 2400 = 16,000 x r/100 x 2 2400 = r/100 x 32,000 240,000 = r x 32,000 r = 240,000/32,000 = 240/32 = 30/4 = 7.5 Answer: C Senior | Next Rank: 100 Posts Posts: 94 Joined: 16 Dec 2014 Location: London, UK Thanked: 2 times Followed by:4 members GMAT Score:770 by mbawisdom » Sun Mar 04, 2018 8:52 am datonman wrote:A sum of$16,000 amounts to \$18,400 in two years according to simple interest. What is the rate of interest?

1.) 6%
2.) 6.5%
3.) 7.5%
4.) 8%
18,400 = 16,000(1 + R.2)
18,400 = 16,000 + 32,000.R
2,400 = 32,000.R
R = 2,400/32,000
R = 0.075
R = 7.5%

Alternatively:

Interest over 2 years = 18,400 - 16,000 = 2,400
Interest over 1 year = 2,400/2 = 1,200
Rate = 1,200/16,000
Rate = 7.5%

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