Categories
Percentages Smart Math

[Smart Math] Percentages Problem 21

Here’s and example of a SMART MATH problem for PERCENTAGES.

Percentages

Problem

$7500 is invested at 5% compound interest for 2 years. What is the interest in the 2nd year?

  1. $293.75
  2. $375.75
  3. $393.75
  4. $400.75
  5. $468.75

The Usual Method

[contentblock id=google-adsense-post]

Interest earned in the 1st year = 5% of $7500

= 0.05 x 7500 = $375

Interest earned in the 2nd year = 5% of $7500 + 5% of $375

= (0.05 x 7500) + (0.05 x 375) = 375 + 18.75 = $393.75

(Ans: 3)

Estimated Time to arrive at the answer = 45 seconds.

Using Technique

[contentblock id=google-adsense-post]

Interest earned in 2nd year has to be slightly larger than $375 (5% of $7500), since we have to add the interest accrued on the interest of the previous year. However, this additional amount being small (due to 5%), we can approximate the actual answer to a value slightly greater than $375, but close to it. The only options satisfying these conditions are ‘2’ and ‘3’. Option ‘2’ is eliminated as it is ‘too close to’ $375.

(Ans: 3)

Estimated Time to arrive at the answer = 5 seconds.
[starrater tpl=10]

[contentblock id=smartmath-blockquote]

Leave a Reply

Your email address will not be published. Required fields are marked *