CFA Level 1: Simple Interest Rate Calculation

Simple Interest Rate Calculation

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Question

What annual simple interest rate would cause a $105 deposit to grow to $125 in 15 months?

Answers

Explanations

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A. B. C. D. E.

B

To solve this question, we have to rearrange the simple interest formula, I=PRT so that the R is by itself. Note that the I (interest) is equal to 20 (125 - 105). Note also that the time component T of the formula is 15/12. On the BAII Plus, press 20 divide 105 divide 15 x 12 = to see the answer. On the HP12C, press 20 ENTER

105 divide 15 divide 12 x to see the answer.