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Simple and Compound Interest - February 18, 2005
The GMAT Practice question for the day is a Simple Interest question.
Question
Braun invested a certain sum of money at 8% p.a. simple interest for 'n' years. At the end of 'n' years, Braun got back 4 times his original investment. What is the value of n?
A. 50 years
B. 25 years
C. 12 years 6 months
D. 37 years 6 months
E. 40 years
The correct choice is (d) and the correct answer is 37 years 6 months.
Explanatory Answer
Let us say Braun invested $100.
Then, at the end of 'n' years he would have got back $400.
Therefore, the Simple Interest earned = 400 - 100 = $300.
We know that Simple Interest = 
Substituting the values in the above equation we get 300 = 
Or 8n = 300
Or n = 37.5 years.
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