### All PSAT Math Resources

## Example Questions

### Example Question #1 : How To Find Simple Interest

Dan took out a $1200 loan at a rate of 3% simple interest a year. What is the amount of interest accrued for one month?

**Possible Answers:**

**Correct answer:**

$1200 is the amount that he took out.

3% annually would yield an interest amount of $36.

Therefore, each month, he would be paying $3 a month.

### Example Question #2 : How To Find Simple Interest

Peter wanted to buy a car and borrowed $2,500 from the bank at 5% simple interest per year. He was able to pay back the loan in one lump sum at six months. What was the total amount he paid the bank?

**Possible Answers:**

**Correct answer:**

Simple interest is given by where = interest, = principal, = rate, and = time in years.

Remember, six months is the same as half of a year. The total paid back to the bank is the principle plus the interest, or $2,562.50.

### Example Question #3 : How To Find Simple Interest

I have $100 in my bank. After one year, I have withdrawn a total of $20 and I still have $85 in the bank. What is the yearly interest rate of my bank account?

**Possible Answers:**

**Correct answer:**

Since I have withdrawn $20, that means I only have $80 in my account.

imples that

which is 6.25%.

### Example Question #1 : How To Find Simple Interest

You really want to buy a car that costs $15,000 but you only have $5,000 saved. Rather than getting a bank loan, your parents offer to lend you the extra money but will require you to pay them back with 4.3% interest. How much will car cost in total after you have paid your parents back?

**Possible Answers:**

**Correct answer:**

Amount borrowed = $15,000 *–* $5,000 = $10,000

Interest of 4.3% = $10,000 * 0.043 = $430

Total cost of car = $5000 + $10000 + $430 = $15,430

### Example Question #5 : How To Find Simple Interest

Ted works over the summer and makes $9 per hour. He works for 20 hours each week for 10 weeks. After paying 10% in taxes, he buys a bike for $500 and puts the rest of his money in the bank.

If Ted's bank pays 5% interest on the total sum once per year, and Ted doesn't add or remove anything from the account, how much money (rounded to the nearest cent) will Ted have in 5 years?

**Possible Answers:**

**Correct answer:**

To start, we see that Ted works for 20 hours per week for 10 weeks. This means he works a total of 200 hours over the summer. He is paid $9 dollars each hour. Therefore he makes $9 x 200 hours = $1800 total over the summer. He then has to pay 10% in taxes, or .1 x $1800, leaving him with . He buys the bike for $500, so he has $1620 - $500 = $1,120 to deposit at the bank.

Now we have to find out how much he will have 5 years later. Since the bank pays 5% interest each year, we know that he will make 5% of what he has each year. He starts with $1,120. 5% of this value is . Adding this to the original $1,120 gives us $1,176.

This is also the same as multiplying instead by 1.05. We repeat this step 5 times, giving us:

### Example Question #2 : How To Find Simple Interest

Jane borrows dollars from the bank. Her loan has an annual interest rate of percent. How much interest will she owe after years? (Use a simple interest calculation)

**Possible Answers:**

**Correct answer:**

Use the simple interest formula:

Interest equals the initial amount multiplied by the annual interest rate multiplied by the number of years:

Let = interest owed

Let = principal (aka the initial amount of the loan)

Let = interest rate

Let = years passed

Therefore: