arkadiyua wrote:

Just to make it clear to myself - am I right in formulating?

We have two equations:

400 = PV + 8*PV*r

300 = PV + 3*PV*r

Thus we get \(PV = \frac{300}{1+3r}\) then substiture this back into another equation and find r.

Tricky indeed, thanks for providing a good practice questions,

Economist!

No need to complicate with equations.

Since it is SI, we just need to divide the total interest earned by the number of years( because

a. in case of simple interest the interest earned each year will be the SAME and

b. in case of simple interest there is no interest on interest earned

)

Hence, 100 is earned over 5 years, so each year 20 is earned.

Now comes the tricky part,

I thought...hmmm..i know the amount invested=300, i know the interest earned=20 and i know the period=5 years, so let me apply the famous I = PRT/100 formula.

HOWEVER, interest is ALWAYS calculated on the PRINCIPAL invested, so we cannot take amount invested as 300 and proceed.

So we need to find the principal invested at the beginning which is 300-(20*3) = 240. Now we can apply I = PRT/100 with P=240, T=3, I = 60 to find R.

Sometimes such small observations help in avoiding silly mistakes