Peter invested a certain sum of money in a simple interest bond whose value grew to $300 at the end ...
Peter invested a certain sum of money in a simple interest bond whose value grew to $300 at the end of 3 years and further to $400 at the end of another 5 years. What was the rate of interest in which he invested his sum?
Answer/Solution
8.33%
Steps/Work
Answer
Initial amount invested = $ X
Amount at the end of year 3 = $ 300
Amount at the end of year 8 (another 5 years) = $ 400
Therefore, the interest earned for the 5 year period between the 3rd year and 8th year = $400 - $300 = $100
As the simple interest earned for a period of 5 years is $ 100, interest earned per year = $20.
Therefore, interest earned for 3 years = 3 * 20 = $ 60.
Hence, initial amount invested X = Amount after 3 years - interest for 3 years
= 300 - 60 = $ 240.
Rate of interest = (interest per year/principal)*100 = 20/240*100 = 8.33%
choice is (E)
Initial amount invested = $ X
Amount at the end of year 3 = $ 300
Amount at the end of year 8 (another 5 years) = $ 400
Therefore, the interest earned for the 5 year period between the 3rd year and 8th year = $400 - $300 = $100
As the simple interest earned for a period of 5 years is $ 100, interest earned per year = $20.
Therefore, interest earned for 3 years = 3 * 20 = $ 60.
Hence, initial amount invested X = Amount after 3 years - interest for 3 years
= 300 - 60 = $ 240.
Rate of interest = (interest per year/principal)*100 = 20/240*100 = 8.33%
choice is (E)