Calculating simple interest

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GMAT Quantitative › Calculating simple interest

Questions 1 - 10
1

How much interest would an investment yield if the principal of is invested for years at a simple interest?

Explanation

2

How much interest will be accumulated in a simple interest investment if is invested for years at interest rate?

$

$

$

$

Explanation

Simple interest equation:

3

Grandpa Jack wants to help pay for college for his grandson, Little Jack. Little Jack is currently 8 years old. Grandpa Jack makes a one-time deposit into an account that earns simple interest every year. Grandpa Jack invests $10,000 now and in ten years, that will grow to $15,000. What rate of simple interest did Grandpa Jack receive?

5%

4%

2%

3%

6%

Explanation

To calculate simple interest, the formula is

where stands for Future Value, stands for Present Value, stands for the interest rate, and stands for the number of periods (in this case years). So plugging in,

Solving this we get

or 5%

ALTERNATE SOLUTION:

Another way of finding this is to calculate the amount of interest per year. Since this is simple interest, Grandpa Jack earns the same amount of interest per year. The total interest earned is 15,000-10,000= 5,000. $5,000 over 10 years, equates to $500 per year. $500 divided by the original $10,000 is .05, or 5%.

4

Jessica deposits $5,000 in a savings account that collects 6% simple interest. How much money will she have accumulated after 5 years?

None of the other answers are correct.

Explanation

5

What return does Florence have to yield in order to make in interest off of a simple investment of for years?

Explanation

Simple interest formula:

Therefore, solving for the rate factor in the equation:

6

How many years would it take Marissa to make in interest using a simple interest investment of in principal at 5% return?

Explanation

Simple interest formula is:

Therefore, solving for the time factor:

7

Jesse has to invest for years for return. How much simple interest will his investment yield?

Explanation

Simple interest formula:

8

We deposit today in an account paying simple interest every months. Assuming we make no other deposits, how much interests will we receive after years?

Explanation

By applying the formula for simple interest rates, , where is the principal, the rate for the given period and is the number of periods we can easily get the amount of interests received. Our is 15, because the rate is given for 6 months. 7 years is equivalent to 14 times 6 months, to that we add the last half year and we get 15 periods. Therefore the amount of interest received is : or .

9

Bob lends $500 to his friend, who agrees to pay it back one month later with 5% simple interest. How much will Bob's friend owe him at the end of the month?

Explanation

At the end of one month, Bob's friend will owe him the $500, plus the 5% simple interest he agreed to pay. The total amount he owes Bob, then, will be $500 plus 5% of $500. This gives us:

10

A bank offers a business a loan in the amount of $13,000 with a simple annual interest rate of 9%. How much will the business owe the bank after 3 years?

Explanation

The accrual of simple interest can be found in two steps. First, multiply the principal amount by the interest rate. Second, multiply that result by the number of years during which interest will accrue.

The question asks for the total amount that the business will owe the bank, so we must add the interest accrued to the principal amount.

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