GMAT Question of the Day - Daily to your Mailbox; hard ones only

 It is currently 18 Sep 2018, 22:54

### 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

# Peter invested a certain sum of money in a simple interest bond whose

Author Message
TAGS:

### Hide Tags

Director
Joined: 01 Apr 2008
Posts: 814
Name: Ronak Amin
Schools: IIM Lucknow (IPMX) - Class of 2014
Peter invested a certain sum of money in a simple interest bond whose  [#permalink]

### Show Tags

Updated on: 17 Jul 2015, 10:21
1
9
00:00

Difficulty:

85% (hard)

Question Stats:

55% (01:48) correct 45% (02:20) wrong based on 135 sessions

### HideShow timer Statistics

Peter invested a certain sum of money in a simple interest bond whose value grew to $300 at the end of 3 years and to$ 400 at the end of another 5 years. What was the rate of interest in which he invested his sum?

A. 12%
B. 12.5%
C. 6.67%
D. 6.25%
E. 8.33%

Originally posted by Economist on 03 Oct 2009, 04:17.
Last edited by Bunuel on 17 Jul 2015, 10:21, edited 1 time in total.
Renamed the topic, edited the question and added the OA.
Manager
Status: Helping People Ace the GMAT
Joined: 16 Jan 2013
Posts: 183
Location: United States
Concentration: Finance, Entrepreneurship
GMAT 1: 770 Q50 V46
GPA: 3.1
WE: Consulting (Consulting)
Re: Peter invested a certain sum of money in a simple interest bond whose  [#permalink]

### Show Tags

17 Jul 2015, 10:32
2
4
In 5 years the value went form 300 to 400, a total of $100. This is 20 per year. In the 3 years early the investment added (3 x 20) = 60 dollars, so it started with 300 - 60 = 240. 20/240 = 1/12 = 8.33% No need to do the calculation of 1/12. It is non repeating and closer to 10% (1/10) than 5% (1/20) _________________ Want to Ace the GMAT with 1 button? Start Here: GMAT Answers is an adaptive learning platform that will help you understand exactly what you need to do to get the score that you want. ##### General Discussion Senior Manager Joined: 21 Jul 2009 Posts: 345 Schools: LBS, INSEAD, IMD, ISB - Anything with just 1 yr program. Re: Peter invested a certain sum of money in a simple interest bond whose [#permalink] ### Show Tags 03 Oct 2009, 08:50 Economist wrote: Peter invested a certain sum of money in a simple interest bond whose value grew to$300 at the end of 3 years and to $400 at the end of another 5 years. What was the rate of interest in which he invested his sum? 1. 12% 2. 12.5% 3. 6.67% 4. 6.25% 5. 8.33% Simple, but there is a small trap in such SI problems, I fell into it..try it out:) Took me time to figure out but the trap is "another 5 years". So overall, at the end of 8 years, the value grew to$400. The OA is E.
_________________

I am AWESOME and it's gonna be LEGENDARY!!!

Manager
Joined: 04 Sep 2009
Posts: 52
WE 1: Real estate investment consulting
Re: Peter invested a certain sum of money in a simple interest bond whose  [#permalink]

### Show Tags

03 Oct 2009, 23:36
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!
Director
Joined: 01 Apr 2008
Posts: 814
Name: Ronak Amin
Schools: IIM Lucknow (IPMX) - Class of 2014
Re: Peter invested a certain sum of money in a simple interest bond whose  [#permalink]

### Show Tags

04 Oct 2009, 04:29
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
Intern
Joined: 08 Jul 2009
Posts: 28
Re: Peter invested a certain sum of money in a simple interest bond whose  [#permalink]

### Show Tags

12 Oct 2009, 05:43
Economist 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

Economist, Hi

Thanks for the explanation but it seems I have trouble with counting interest problems.. Can you please just explain it once more( step by step). I faced one problem of these at the beginning of my first GMAT and failed to get it right.. I am having the GMAT againa fter a week . thanks in advance
Intern
Joined: 15 Jul 2009
Posts: 3
Re: Peter invested a certain sum of money in a simple interest bond whose  [#permalink]

### Show Tags

13 Oct 2009, 02:09
Hi,

I got the answer as 6.25%. Kindly explain why wil it be 8.33%. Can't seem to get my head around it.. Thnx
Manager
Joined: 12 Oct 2009
Posts: 100
Re: Peter invested a certain sum of money in a simple interest bond whose  [#permalink]

### Show Tags

13 Oct 2009, 05:01
1
Hi,

I got the answer as 6.25%. Kindly explain why wil it be 8.33%. Can't seem to get my head around it.. Thnx

Will try to explain the best I can
Lets assume the Principal Amount (initial amount invested) to be P
rate of interest to be "R" and time as T. We need to find R

Now After a time of 3years the principal P amounts to $300 and after a time of 8years ( question says after another 5years so 3+5) P becomes$400.
Formulating the above data
Amount (A1) at end of 3years
A1= P(1 + 3R/100) = 300

Amount (A2) at end of 8years
A2 = P(1 + 8R/100) = 400

Dividing A2 by A1 we get
(1 + 8R/100)/(1 + 3R/100) = 4/3

after cross multiplication we are left with 12R =100 which gives R = 8.33%

Hope this helps
Manager
Joined: 18 Jul 2009
Posts: 166
Location: India
Schools: South Asian B-schools
Re: Peter invested a certain sum of money in a simple interest bond whose  [#permalink]

### Show Tags

13 Oct 2009, 12:01
got it thnx
_________________

Bhushan S.
If you like my post....Consider it for Kudos

Senior Manager
Affiliations: PMP
Joined: 13 Oct 2009
Posts: 271
Re: Peter invested a certain sum of money in a simple interest bond whose  [#permalink]

### Show Tags

13 Oct 2009, 12:11
OMG! if you don't read the word "another" - u r gone

So this is a test to attentiveness in reading more than your Quant skills
_________________

Thanks, Sri
-------------------------------
keep uppp...ing the tempo...

Press +1 Kudos, if you think my post gave u a tiny tip

Intern
Joined: 21 Sep 2016
Posts: 29
Re: Peter invested a certain sum of money in a simple interest bond whose  [#permalink]

### Show Tags

07 Sep 2017, 17:34
Let x be the capital invested and y, the interest rate. Thus:

$$3xy + x = 300$$
$$8xy + x = 400$$

Solving it we'll get:

$$x = 240$$
$$y = 1/12$$
Manager
Joined: 04 May 2014
Posts: 161
Location: India
WE: Sales (Mutual Funds and Brokerage)
Peter invested a certain sum of money in a simple interest bond whose  [#permalink]

### Show Tags

12 Sep 2017, 02:03
Amount from start of 1st and till end of 3rd year=$300 Amount from 1st year till end of 8th year=$400
From 3rd to 8th-year(5 years) Interest earned=$100. Per year Interest earned=100/5=$20.
Since this is simple interest every year interest earned is $20 then in 8 years Interest earned=$160
Principal=400-160=240.

Total return in 8 years=$$\frac{160}{240}*100$$=66.66%

Per year return=$$\frac{66.66}{8}$$=8.33%
Director
Joined: 02 Sep 2016
Posts: 724
Re: Peter invested a certain sum of money in a simple interest bond whose  [#permalink]

### Show Tags

14 Sep 2017, 06:10
In 5 years the value went form 300 to 400, a total of \$100. This is 20 per year.

In the 3 years early the investment added (3 x 20) = 60 dollars, so it started with 300 - 60 = 240.

20/240 = 1/12 = 8.33%

No need to do the calculation of 1/12. It is non repeating and closer to 10% (1/10) than 5% (1/20)

Very nice method. I solved it using x's and y's.

So what I understood is that the interest is same for 8 years. That is why you have calculated 60 (3*20).
Re: Peter invested a certain sum of money in a simple interest bond whose &nbs [#permalink] 14 Sep 2017, 06:10
Display posts from previous: Sort by

# Events & Promotions

 Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.