By Consumer Dummies

Word problems on the GED Math test that involve interest rates are usually straightforward. However, you will need to be familiar with the interest rate formula.

Practice Questions

  1. Arnold invested $700 in a savings account. After one year, his account balance was $726.25. What percent annual interest did his bank pay?
  2. Amy invested $500 in a savings account that pays a fixed simple interest rate. After three years, her account balance is $552.50. What percent annual interest did her bank pay?

    A. 3.5%
    B. 5.5%
    C. 10.5%
    D. 17.5%

Answers and Explanations

  1. The correct answer is 3.75%.

    You can use the following formula to calculate the annual interest rate:

    GED_2401

    Plug in the given values to find the annual interest rate:

    GED_2402

    Hence, the interest rate as 3.75%.

    Alternatively, the interest formula is

    I = Prt

    where I is the interest earned, P is the principal, r is the interest rate, and t is the time. Substituting in the values gives you

    GED_2403

    To convert this decimal answer into a percentage, simply multiply it by 100 to get 3.75%.

  2. The correct answer is 3.5%.

    You can use the following formula to calculate the annual interest rate:

    GED_2404

    Plug in the given values to find the rate:

    GED_2405

    This value is for three years of interest, so dividing by 3 gives you the annual simple interest rate, which equals 3.5%. Hence, Choice (A) is correct.

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