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Interest

by Joy Shaha » Fri Nov 18, 2016 1:14 pm
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%
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by DavidG@VeritasPrep » Fri Nov 18, 2016 2:31 pm
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%
Call last year's interest rate: x.
If it increased by 10%, it increased by .1x
This year's interest rate = x +.1x = 1.1x; we know this is 11 percent, so 1.1x = 11; x = 10; Answer is D
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by Jay@ManhattanReview » Tue Jan 10, 2017 12:05 am
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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by ceilidh.erickson » Tue Jan 10, 2017 2:28 pm
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.
Ceilidh Erickson
EdM in Mind, Brain, and Education
Harvard Graduate School of Education
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