GMAT Math : Calculating simple interest

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Example Questions

Example Question #111 : Word Problems

How much interest will be accumulated in a simple interest investment if $\$10,000$ is invested for years at $10\%$ interest rate?

Possible Answers:

$ 7,000

$ 4,000

$ 6000

$ $5000

Correct answer:

$ 6000

Explanation:

Simple interest equation:

I=prt

I=(10,000)(6)(0.10)

I=6000

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Example Question #11 : Calculating Simple Interest

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

Possible Answers:

$\$6500$

$\$9000$

None of the other answers are correct.

$\$8500$

$\$1500$

Correct answer:

$\$6500$

Explanation:

A=p+prt

$A= accumulated\ sum;\ p=principle;\ r=rate;\ t=time\ in\ years$

A=5000+5000(0.06)5=6500

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Example Question #12 : Interest Problems

How many years does it take an investment of $\$$ 50000 to yield $\$$ 40000 in interest if invested at a $8\%$ simple interest rate?

Possible Answers:

$t= 15\: years$

$t= 8\: years$

$t=20\ years$

$t= 1.5\: years$

$t= 10\: years$

Correct answer:

$t= 10\: years$

Explanation:

Remember the simple interest formula, where I is interest, p is principle, r is rate, and t is time:

I=p*r*t

$t=\frac{I}{p*r}$

$t=\frac{40000}{50000*0.08}$

$t= 10\: years$

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Example Question #12 : Calculating Simple Interest

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?

Possible Answers:

$\$505$

$\$575$

$\$550$

$\$510$

$\$525$

Correct answer:

$\$525$

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:

$500+0.05(500)=500+\frac{1}{20}(500)=500+25=525$

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Example Question #14 : Interest Problems

We deposit today $\$175,000$ in an account paying $6\%$ simple interest every months. Assuming we make no other deposits, how much interests will we receive after 7.5 years?

Possible Answers:

$\$332,500$

$\$175,000$

$\$127,500$

$\$157,500$

$\$189,600$

Correct answer:

$\$157,500$

Explanation:

By applying the formula for simple interest rates, Pnr , 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 : $I= 175,000\cdot0.06\cdot15$ or 157,500 .

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Example Question #14 : Calculating Simple Interest

If $\$12,000$ is invested at $9\%$ simple annual interest rate over months, what it is the amount of interest earned over that period?

Possible Answers:

$\$1260$

$\$630$

$\$4500$

$\$315$

$\$190$

Correct answer:

$\$630$

Explanation:

Here, we cannot apply the rate as is, since it is given for a year. We just have to divide the rate by the number of months in a year, since we are looking for a monthly rate. Therefore, the applicable rate is $\frac{0.09}{12}$ , now we can apply the Pnr formula and we get: $12,000\cdot\frac{0.09}{12}\cdot7$ or 630 .

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Example Question #12 : Interest Problems

A local credit union offers short-term loans at an annual interest rate of $2.3\%$ . If Jasmine takes out a $\$1500$ loan for months, how much will she pay in interest?

Possible Answers:

$\$207.00$

$\$13.80$

$\$23.00$

$\$17.25$

$\$230.00$

Correct answer:

$\$17.25$

Explanation:

Here we need our simple interest formula. There is no compounding, so all we need is:

$\small I=P*r*n$

= Dollar amount of interest

= Amount borrowed/invested

= Annual interest rate

= Number of years borrowed/loaned

Plug in what we know and solve for :

$I= \p \$1500*0.023*0.5=\$17.25$

So, Jasmine pays $\$17.25$ in interest.

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Example Question #13 : Interest Problems

We deposit $\$140,000$ today in an account paying $10\%$ annual simple interest, how much do we have in the account at the end of the $10^{th}$ year, provided we make no other deposit?

Possible Answers:

$\$280,000$

$\$140,000$

$\$300,000$

$\$320,000$

$\$160,000$

Correct answer:

$\$280,000$

Explanation:

This is a simple interest problem, therefore, the amount of interests received is given by the formula: Pnr , where is the principal, is the number of periods and is the rate over that period. In this problem is 140,000, is 10 and is 10% or 0.1. Therefore we get $140,000\cdot0.1\cdot10$ or 140,000. We add the interest received to the principal, and we get the final answer of 280,000 .

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GMAT Math : Calculating simple interest

Study concepts, example questions & explanations for GMAT Math

All GMAT Math Resources

Example Questions

Example Question #111 : Word Problems

Example Question #11 : Calculating Simple Interest

Example Question #12 : Interest Problems

Example Question #12 : Calculating Simple Interest

Example Question #14 : Interest Problems

Example Question #14 : Calculating Simple Interest

Example Question #12 : Interest Problems

Example Question #13 : Interest Problems

All GMAT Math Resources

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