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If an investor earns $120 as interest on a stock worth $800 at a simple interest

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Question: If an investor earns $120 as interest on a stock worth $800 at a simple interest rate of 5% per annum, how long did the investment last?

Options:

  1. 2 years
  2. 3 years
  3. 4 years
  4. 5 years

Correct Answer: 4 years

Solution: 

Time = (Interest / (Principal * Rate)) = 120 / (800 * 0.05) = 120 / 40 = 3 years

If an investor earns $120 as interest on a stock worth $800 at a simple interest

Practice Questions

Q1
If an investor earns $120 as interest on a stock worth $800 at a simple interest rate of 5% per annum, how long did the investment last?
  1. 2 years
  2. 3 years
  3. 4 years
  4. 5 years

Questions & Step-by-Step Solutions

If an investor earns $120 as interest on a stock worth $800 at a simple interest rate of 5% per annum, how long did the investment last?
  • Step 1: Identify the given values. The interest earned is $120, the principal (initial investment) is $800, and the interest rate is 5% per annum.
  • Step 2: Convert the interest rate from a percentage to a decimal. 5% as a decimal is 0.05.
  • Step 3: Use the formula for time in simple interest, which is Time = Interest / (Principal * Rate).
  • Step 4: Substitute the values into the formula: Time = 120 / (800 * 0.05).
  • Step 5: Calculate the denominator: 800 * 0.05 = 40.
  • Step 6: Now divide the interest by the result from Step 5: Time = 120 / 40.
  • Step 7: Calculate the final result: 120 divided by 40 equals 3.
  • Step 8: Conclude that the investment lasted for 3 years.
  • Simple Interest Calculation – Understanding how to calculate time using the formula for simple interest, which is Time = Interest / (Principal * Rate).
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