Last year a certain bond yielded 5 percent of its face...

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swerve: Legendary Member; Posts: 2535; Joined: Sun Oct 29, 2017 2:04 pmFollowed by: 6 members

by swerve » Wed Mar 07, 2018 9:58 am

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Last year a certain bond yielded 5 percent of its face value in interest. If that interest was approximately 4 percent of the bond's selling price of $7,500, what is the bond's face value?

A. $6,000
B. $6,750
C. $7,425
D. $7,500
E. $9,375

The OA is A.

Please, can any expert explain this PS question for me? I can't get the correct answer. I need your help. Thanks.

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Source: Beat The GMAT — Problem Solving | Wed Mar 07, 2018 9:58 am

mbawisdom: Senior | Next Rank: 100 Posts; Posts: 94; Joined: Tue Dec 16, 2014 9:50 amFollowed by: 4 members; Location: London, UK; Thanked: 2 times; GMAT Score:770

by mbawisdom » Wed Mar 07, 2018 11:02 am

swerve wrote:Last year a certain bond yielded 5 percent of its face value in interest. If that interest was approximately 4 percent of the bond's selling price of $7,500, what is the bond's face value?

A. $6,000
B. $6,750
C. $7,425
D. $7,500
E. $9,375

The OA is A.

Please, can any expert explain this PS question for me? I can't get the correct answer. I need your help. Thanks.

I = Interest
FV = Face Value

(1) I = FV*0.05
(2) I = 0.04*7500

FV*0.05 = 0.04*7500
FV = (4/5)*7500
FV = 6000

Answer is A

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Jeff@TargetTestPrep: GMAT Instructor; Posts: 1462; Joined: Thu Apr 09, 2015 9:34 amFollowed by: 22 members; Location: New York, NY; Thanked: 39 times

by Jeff@TargetTestPrep » Mon Mar 12, 2018 10:32 am

swerve wrote:Last year a certain bond yielded 5 percent of its face value in interest. If that interest was approximately 4 percent of the bond's selling price of $7,500, what is the bond's face value?

A. $6,000
B. $6,750
C. $7,425
D. $7,500
E. $9,375

Since 4% of $7,500 = 0.04 x 7,500 = $300, so $300 is the interest and it's 5% of the face value of the bond. If we let b = the bond's face value, we have:

0.05b = 300

b = 300/0.05

b = 6000 dollars

Answer: A

Jeffrey Miller
Head of GMAT Instruction
[email protected]

See why Target Test Prep is rated 5 out of 5 stars on BEAT the GMAT. Read our reviews

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deloitte247: Legendary Member; Posts: 2214; Joined: Fri Mar 02, 2018 2:22 pmFollowed by: 5 members

by deloitte247 » Sun Mar 18, 2018 11:30 am

Let the bond's face value be x
Therefore, the interest (I) = 5% of x = 0.05*x = 0.05x
Also, I == 4% of $7500
=I=0.04 (7500)
=$300
Since I=0.05x =300
$$x=\frac{300}{0.05}$$
x=$6000 (option A)

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