Last visit was: 23 May 2024, 09:16 It is currently 23 May 2024, 09:16
Toolkit
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

# Ms. Kessler bought 100 bonds for $91.25 each. At the end of 2 years th SORT BY: Tags: Show Tags Hide Tags Math Expert Joined: 02 Sep 2009 Posts: 93419 Own Kudos [?]: 626062 [69] Given Kudos: 81940 Most Helpful Reply IESE School Moderator Joined: 11 Feb 2019 Posts: 271 Own Kudos [?]: 171 [15] Given Kudos: 53 Tutor Joined: 04 Aug 2010 Posts: 1321 Own Kudos [?]: 3162 [12] Given Kudos: 9 Schools:Dartmouth College General Discussion Senior Moderator - Masters Forum Joined: 19 Jan 2020 Posts: 3137 Own Kudos [?]: 2782 [3] Given Kudos: 1511 Location: India GPA: 4 WE:Analyst (Internet and New Media) Re: Ms. Kessler bought 100 bonds for$91.25 each. At the end of 2 years th [#permalink]
1
Kudos
2
Bookmarks
The cost price of getting 100 bonds for 91.25$is 9125$

She collected the par value in 2 year period.
100*100=10,000$Also. She got 2.75$ premium per bond/annum.
100*2.75*2 (for two years)=550

Total amount she received is 10000+550=10550

The ROI percent she have is Revenue-Cost/Cost*100
(10550-9125)*100/9125
142500/9125
15.6 (approximate) for two years.
Per annum ROI will be 15.6/2=7.8
Since in simple interest, interest amount never changes over the period of time.

Posted from my mobile device
Current Student
Joined: 24 Oct 2016
Posts: 166
Own Kudos [?]: 228 [1]
Given Kudos: 116
Location: India
Concentration: Technology, Strategy
GMAT 1: 710 Q49 V38
GMAT 2: 760 Q50 V44 (Online)
GPA: 3.61
Ms. Kessler bought 100 bonds for $91.25 each. At the end of 2 years th [#permalink] 1 Kudos Bunuel wrote: Ms. Kessler bought 100 bonds for$91.25 each. At the end of 2 years the bonds matured and she collected the par value of $100 each. In addition she collected interest for the 2 years at an annual rate of 2.75 percent of par value. What was Ms. Kessler's effective simple annual interest rate of return on her investment, to the nearest tenth of a percent? A. 4.4% B. 6.8% C. 7.8% D. 12.6% E. 15.6% PS20368 Bunuel How can we assume that the statement " In addition she collected interest for the 2 years at an annual rate of 2.75 percent of par value" talks about simple interest and not compound interest? I got lost in calculating Compound interest! Director Joined: 09 Jan 2020 Posts: 961 Own Kudos [?]: 228 [1] Given Kudos: 434 Location: United States Re: Ms. Kessler bought 100 bonds for$91.25 each. At the end of 2 years th [#permalink]
1
Bookmarks
Bunuel wrote:
Ms. Kessler bought 100 bonds for $91.25 each. At the end of 2 years the bonds matured and she collected the par value of$100 each. In addition she collected interest for the 2 years at an annual rate of 2.75 percent of par value. What was Ms. Kessler's effective simple annual interest rate of return on her investment, to the nearest tenth of a percent?

A. 4.4%
B. 6.8%
C. 7.8%
D. 12.6%
E. 15.6%

PS20368

$$100 * 91.25 = 9,125$$
100 bonds at maturity $$= 10,000$$
2.75% par value $$= 275 * 2 = 550$$

$$10,000 + 550 = 10,550$$
$$10,550 - 9,125 =  1,425$$

$$\frac{1,425}{2} = 712.50$$

$$\frac{712}{9125} = 7.8$$%

Intern
Joined: 23 Apr 2019
Posts: 33
Own Kudos [?]: 49 [0]
Given Kudos: 48
Concentration: Entrepreneurship, Marketing
GMAT 1: 750 Q49 V44
Re: Ms. Kessler bought 100 bonds for $91.25 each. At the end of 2 years th [#permalink] Bunuel wrote: Ms. Kessler bought 100 bonds for$91.25 each. At the end of 2 years the bonds matured and she collected the par value of $100 each. In addition she collected interest for the 2 years at an annual rate of 2.75 percent of par value. What was Ms. Kessler's effective simple annual interest rate of return on her investment, to the nearest tenth of a percent? A. 4.4% B. 6.8% C. 7.8% D. 12.6% E. 15.6% PS20368 Bunuel - can you please help me understand how to formulate the equation for "What was Ms. Kessler's effective simple annual interest rate of return on her investment". I thought it will be Total Interest earned (550) / Total cost (9125) * 100. Where did I go wrong? Intern Joined: 23 Oct 2020 Posts: 23 Own Kudos [?]: 4 [0] Given Kudos: 47 Re: Ms. Kessler bought 100 bonds for$91.25 each. At the end of 2 years th [#permalink]
yashikaaggarwal wrote:
The cost price of getting 100 bonds for 91.25$is 9125$

She collected the par value in 2 year period.
100*100=10,000$Also. She got 2.75$ premium per bond/annum.
100*2.75*2 (for two years)=550

Total amount she received is 10000+550=10550

The ROI percent she have is Revenue-Cost/Cost*100
(10550-9125)*100/9125
142500/9125
15.6 (approximate) for two years.
Per annum ROI will be 15.6/2=7.8
Since in simple interest, interest amount never changes over the period of time.

Posted from my mobile device

yashikaaggarwal Bunuel any suggestions on how to do this division quickly? I got stucked there
Senior Moderator - Masters Forum
Joined: 19 Jan 2020
Posts: 3137
Own Kudos [?]: 2782 [0]
Given Kudos: 1511
Location: India
GPA: 4
WE:Analyst (Internet and New Media)
Ms. Kessler bought 100 bonds for $91.25 each. At the end of 2 years th [#permalink] Michele4 wrote: yashikaaggarwal wrote: The cost price of getting 100 bonds for 91.25$ is 9125$She collected the par value in 2 year period. 100*100=10,000$
Also. She got 2.75$premium per bond/annum. 100*2.75*2 (for two years)=550 Total amount she received is 10000+550=10550 The ROI percent she have is Revenue-Cost/Cost*100 (10550-9125)*100/9125 142500/9125 15.6 (approximate) for two years. Per annum ROI will be 15.6/2=7.8 Since in simple interest, interest amount never changes over the period of time. Answer is C Posted from my mobile device yashikaaggarwal Bunuel any suggestions on how to do this division quickly? I got stucked there We can roundoff digits to near hundreds to get answer easily, without indulging in more decimals. Let's Quote 9125 as 9000 and 142500 as 142000 dividing 142000 with 9000 = 15.77 which is ROI for 2 years 1 year ROI will be 7.8 something which is nearby option C Hope this helps Senior Moderator - Masters Forum Joined: 19 Jan 2020 Posts: 3137 Own Kudos [?]: 2782 [0] Given Kudos: 1511 Location: India GPA: 4 WE:Analyst (Internet and New Media) Re: Ms. Kessler bought 100 bonds for$91.25 each. At the end of 2 years th [#permalink]
jayarora wrote:
Bunuel wrote:
Ms. Kessler bought 100 bonds for $91.25 each. At the end of 2 years the bonds matured and she collected the par value of$100 each. In addition, she collected interest for the 2 years at an annual rate of 2.75 percent of par value. What was Ms. Kessler's effective simple annual interest rate of return on her investment, to the nearest tenth of a percent?

A. 4.4%
B. 6.8%
C. 7.8%
D. 12.6%
E. 15.6%

PS20368

Bunuel
How can we assume that the statement " In addition, she collected interest for the 2 years at an annual rate of 2.75 percent of par value" talks about simple interest and not compound interest? I got lost in calculating Compound interest!

Interest is always calculated as simple interest unless stated otherwise, so you have to calculate Simple interest here as no compound interest is mentioned.
Senior Moderator - Masters Forum
Joined: 19 Jan 2020
Posts: 3137
Own Kudos [?]: 2782 [1]
Given Kudos: 1511
Location: India
GPA: 4
WE:Analyst (Internet and New Media)
Re: Ms. Kessler bought 100 bonds for $91.25 each. At the end of 2 years th [#permalink] 1 Kudos anantgupta93 wrote: Bunuel wrote: Ms. Kessler bought 100 bonds for$91.25 each. At the end of 2 years the bonds matured and she collected the par value of $100 each. In addition she collected interest for the 2 years at an annual rate of 2.75 percent of par value. What was Ms. Kessler's effective simple annual interest rate of return on her investment, to the nearest tenth of a percent? A. 4.4% B. 6.8% C. 7.8% D. 12.6% E. 15.6% PS20368 Bunuel - can you please help me understand how to formulate the equation for "What was Ms. Kessler's effective simple annual interest rate of return on her investment". I thought it will be Total Interest earned (550) / Total cost (9125) * 100. Where did I go wrong? ROI is calculated upon total earnings-cost, not just interest. Ms. Kessler not only gained interest but the par value sale of the bonds which she purchased for less value. so {(salevalue + Interest - purchase value)/purchase value}*100 Target Test Prep Representative Joined: 14 Oct 2015 Status:Founder & CEO Affiliations: Target Test Prep Posts: 18893 Own Kudos [?]: 22304 [4] Given Kudos: 285 Location: United States (CA) Re: Ms. Kessler bought 100 bonds for$91.25 each. At the end of 2 years th [#permalink]
3
Kudos
1
Bookmarks
Bunuel wrote:
Ms. Kessler bought 100 bonds for $91.25 each. At the end of 2 years the bonds matured and she collected the par value of$100 each. In addition she collected interest for the 2 years at an annual rate of 2.75 percent of par value. What was Ms. Kessler's effective simple annual interest rate of return on her investment, to the nearest tenth of a percent?

A. 4.4%
B. 6.8%
C. 7.8%
D. 12.6%
E. 15.6%

PS20368

Solution:

In total, each bond has a value of 100 + 100 x 0.0275 x 2 = $105.50 at the end of the 2 years. This is 105.5 - 91.25 =$14.25 more than its value at the beginning of the 2-year period. Since the extra $14.25 is for a 2-year period, the annual simple interest rate is: (14.25/2) / 91.25 x 100 ≈ 7.8 percent Answer: C Manager Joined: 13 Sep 2020 Posts: 111 Own Kudos [?]: 13 [0] Given Kudos: 413 Location: India GMAT 1: 690 Q49 V34 Re: Ms. Kessler bought 100 bonds for$91.25 each. At the end of 2 years th [#permalink]
ScottTargetTestPrep

Why are we multiplying 2 with 2.75 when it is not given in the question that this interest was per annum? How are we assuming that this percent interest was per annum?

Gagan
Target Test Prep Representative
Joined: 14 Oct 2015
Status:Founder & CEO
Affiliations: Target Test Prep
Posts: 18893
Own Kudos [?]: 22304 [0]
Given Kudos: 285
Location: United States (CA)
Re: Ms. Kessler bought 100 bonds for $91.25 each. At the end of 2 years th [#permalink] Expert Reply gagan0303 wrote: ScottTargetTestPrep Why are we multiplying 2 with 2.75 when it is not given in the question that this interest was per annum? How are we assuming that this percent interest was per annum? Kindly please clear this doubt. Gagan Response: The question says “In addition she collected interest for the 2 years at an annual rate of 2.75 percent of par value.” Senior Manager Joined: 02 Jan 2022 Posts: 263 Own Kudos [?]: 97 [0] Given Kudos: 3 GMAT 1: 760 Q50 V42 Re: Ms. Kessler bought 100 bonds for$91.25 each. At the end of 2 years th [#permalink]
Interest earned per bond because of maturity = $100 -$91.25 = $8.75 Since this is the interest earned over a period of two years, Interest earned per bond each year for maturity =$8.75/2 = $4.375 Also, she collected interest at an annual rate of 2.75 of par value which is equal to$100*2.75/100 = $2.75 Thus, the total interest per bond per year =$4.375 + $2.75 =$7.125
Now, the principal amount invested per bond was $91.25. Thus, effective interest rate = (7.125/91.25)*100 = 7.8% Thus, the correct answer is C. Tutor Joined: 02 Oct 2015 Posts: 173 Own Kudos [?]: 26 [0] Given Kudos: 4 Re: Ms. Kessler bought 100 bonds for$91.25 each. At the end of 2 years th [#permalink]