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# An investment is made at 12.5% annual simple interest. The n

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An investment is made at 12.5% annual simple interest. The n [#permalink]  30 Jul 2018, 09:44
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An investment is made at 12.5% annual simple interest. The number of years it will take for the cumulative value of the interest to equal the original investment is equalt to which of the following?

(A) 4
(B) 5
(C) 6
(D) 7
(E) 8
[Reveal] Spoiler: OA

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Re: An investment is made at 12.5% annual simple interest. The n [#permalink]  10 Aug 2018, 18:10
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sandy wrote:
An investment is made at 12.5% annual simple interest. The number of years it will take for the cumulative value of the interest to equal the original investment is equalt to which of the following?

(A) 4
(B) 5
(C) 6
(D) 7
(E) 8

We can assume the initial investment is $1000. Since the investment has a simple annual interest rate of 12.5%, in one year, the amount of interest accumulated is 1000 x 0.125 =$125. So it will take 1000/125 = 8 years to accumulate \$1000 in interest.

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Retired Moderator
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Re: An investment is made at 12.5% annual simple interest. The n [#permalink]  12 Aug 2018, 07:15
Expert's post
Explanation

“Simple” interest means that the interest is calculated based on the initial amount every time; the interest earned is not included in future calculations. Each year, the investment pays 12.5%, or $$\frac{1}{8}$$, of the original investment as simple interest.

As a result, it will take exactly 8 years for the cumulative interest to add up to the original investment.

Be careful not to apply the compound interest formula here. If the 12.5% interest is in fact compounded annually, it will take only about 6 years for the investment to double in value.
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Re: An investment is made at 12.5% annual simple interest. The n [#permalink]  01 Jan 2020, 14:29
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sandy wrote:
An investment is made at 12.5% annual simple interest. The number of years it will take for the cumulative value of the interest to equal the original investment is equalt to which of the following?

(A) 4
(B) 5
(C) 6
(D) 7
(E) 8

Simple Interest (I) = Principal (P) * Time (T) * Rate (R)
I = P * T * R

I = P (Given)

I = I * T * R
T * R = 1 (as it is 1 year)
T * 12.5/100 = 1
T = 100 / 12.5
T = 8 years

Hence, E.

Another way= 12.5 * 8 = 100. Answer: E
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Re: An investment is made at 12.5% annual simple interest. The n [#permalink]  01 Jan 2020, 23:04
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We invested X amount in the beginning and we need the interest to be x at the end.
Now, each year interest gained = $$\frac{1}{8}*x$$
For it to become x, we need 8 years.

OA,E
sandy wrote:
An investment is made at 12.5% annual simple interest. The number of years it will take for the cumulative value of the interest to equal the original investment is equalt to which of the following?

(A) 4
(B) 5
(C) 6
(D) 7
(E) 8

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Re: An investment is made at 12.5% annual simple interest. The n   [#permalink] 01 Jan 2020, 23:04
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