About Solving Simple Interest Problems:
When solving a word problem, the most important step is to understand the main objective. This gives the student a laser focus. We can then filter through all of the information, leading to an equation that can be solved. We then provide an answer and check to make sure it is reasonable.
Test Objectives
- Demonstrate the ability to read a word problem and understand the main objective
- Understand how to set up an equation based on the information given in a word problem
- Demonstrate the ability to check the solution to a word problem
#1:
Instructions: solve each word problem.
a) Olivia deposits a certain amount in a savings account that pays 2.9% annual simple interest for the first year, 3.5% for the second, and 4.2% for the third. If at the end of the third year, a total of $12,190 was earned in simple interest, what was the original amount invested?
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#2:
Instructions: solve each word problem.
a) Charlotte purchases a sailboat using a 12-year special loan package. The loan package allows her to pay only simple interest for the first five years of the loan, followed by seven years of normally structured payments (principal and simple interest). Throughout the loan, she will pay a rate of 1.9% annual simple interest. If at the end of the interest-only period, the total payments were $2175.50, how much was the amount of the boat loan?
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#3:
Instructions: solve each word problem.
a) Leah has $200,000 to invest. After meeting with a financial planner, she decides to invest some of the money in a savings account paying 1.25% annual simple interest and the remainder of the money in an annuity that pays 3.15% annual simple interest. If she wants to earn a total amount of $5350 from these two investments each year, how much should be invested at each rate?
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#4:
Instructions: solve each word problem.
a) Sarah arranged a meeting with her local financial planner and decided she needs to earn a total of 4% annual simple interest between two investments. She decided to invest $28,500 in a savings account, that pays 2% annual simple interest. Additionally, she decided to invest in a government bond fund, that pays 5% annual simple interest. How much should she invest in the bond fund to achieve her investment goals?
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#5:
Instructions: solve each word problem.
a) Last year, Scarlett earned a total of $16,800 in simple interest from two investments. She invested part of her money in government bonds, which pay 2.5% annual simple interest, and $15,000 more than 4 times this amount in mutual funds, which pay 6% annual simple interest. How much money did Scarlett invest in each?
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Written Solutions:
#1:
Solutions:
a) $115,000
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#2:
Solutions:
a) $22,900
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#3:
Solutions:
a) $50,000 - savings account, $150,000 annuity
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#4:
Solutions:
a) $57,000
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#5:
Solutions:
a) $60,000 - government bonds, $255,000 - mutual funds
