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simple interest

Problem Solving — algebra and arithmetic (GMAT Focus Edition)
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simple interest

by rupsk » Tue Apr 26, 2011 12:00 pm
Hi pals,

I was working on some of the simple interest problems and had doubt on some. please help me on the same

A certain sum amounts to $1725 in 3 years and $1875 in 5 years. Find the rate % per annum?

A. 5%
B. 6%
C. 4%
D. 3%
E. 7%


At what rate percent on simple interest will a sum of money double itself in 30 years?

9/2%,7/2%,5%,4%,3%

Thanks
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by Tani » Tue Apr 26, 2011 3:00 pm
A very rough rule of thumb for compound interest is that the product of the interest rate and the number of years should be between 70% and 75%.

For simple interest, divide the number of years by the rate.
Tani Wolff
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by rupsk » Tue Apr 26, 2011 3:09 pm
I am not able to understand your reply. There are two questions and I know the formula for simple interest but i am having tough time implementing those formula in the questions to get an answer.
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by Tani » Tue Apr 26, 2011 3:26 pm
to go from $1725 to $1875 in 5 years you need to increase by $150. That is $30/year which is 2.4%.

To double in 30 years you need 3.333% per year.

Where did you get your problems. I don't see any correct answers among the choices.
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by rupsk » Tue Apr 26, 2011 4:40 pm
I got this questions from the jumbo test online. for the second question i had same approach as yours and i was surprise to see the options.

while for first question i had diff approach which says
(1725-p)100=(1875-p)20*3 and then solving this i get value of p and then keeping it in formula
1875-p=pr/20 will give r as 5%. but i am not able to understand how you got your r as 2.4%.
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by bajwa2307 » Tue Apr 26, 2011 4:40 pm
rupsk wrote:Hi pals,

I was working on some of the simple interest problems and had doubt on some. please help me on the same

A certain sum amounts to $1725 in 3 years and $1875 in 5 years. Find the rate % per annum?

A. 5%
B. 6%
C. 4%
D. 3%
E. 7%


At what rate percent on simple interest will a sum of money double itself in 30 years?

9/2%,7/2%,5%,4%,3%

Thanks
Question 1. SI in 2 years = 1875 - 1725 = 150$

We know that, the SI is same for each year, so

SI for 1 year = 75$

now, SI for 3 years = 75 * 3 = 225$

amount = Principal + SI
1725 = Principal + 225
principal = 1725 - 225 = 1500$

applying the SI formula

225 = 1500*R*3/100

R = 225/45
R = 5 %

so the answer is A


Question 2. let Prinicpal be x and rate be R

so for a some of money to double itself, the SI must be equal to the principal such that x+x = 2x (double)

so putting values in the formula.

x = x*r*30/100

r = 10/3 = 3.33

It seems the answers are not listed or given correctly in the question, but if the question is correct then the closest answer is D
Verbal is testing my patience
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by bajwa2307 » Tue Apr 26, 2011 4:45 pm
Tani Wolff - Kaplan wrote:to go from $1725 to $1875 in 5 years you need to increase by $150. That is $30/year which is 2.4%.

To double in 30 years you need 3.333% per year.

Where did you get your problems. I don't see any correct answers among the choices.
I think you misread the question here. The starting amount was not $1725 as the question states that a certain sum amounts to $1725 in 3 years
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by Tani » Tue Apr 26, 2011 6:15 pm
You're right - I misread the first one! Sorry
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