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Friday, June 9, 2023

CFAT Practice Test Questions with Answers in PROBLEM SOLVING ps009

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1. A student worked during the summer and earned $5,000. He invests his earnings in a 2-yr term deposit that pays 3% per year. What is the value of his investment at the end of the term?


a. $5,403.5

b. $5,504.5

c. $5,304.5 - answer 

d. $5,305.4


Solution:

The rate in this problem is compound interest, meaning that the interest earned at the end of the first year will be added to the principal.


$5,000 = initial investment 

2-yr  = term 

3%/yr = interest rate


step1: 

solve for the Interest earned at the end of the first year


Interest at year 1

= $5,000 x 3%

= $5,000 x 0.03

= $150



step2: 

add the Interest at year 1 to the initial investment 


Principal at year 1 

= $5,000 + $150 

= $5,150



step3: 

solve for the Interest at the end of the second year


Interest at year 2

= $5,150 x 3%

= $5,150 x 0.03

= $154.5



step4: 

add the Principal at year 1 to the Interest at year 2


Total amount at the end of the term

= $5,150 + $154.5

= $5,304.5




2. Jaden is 6 years older than his sister Florence.  Next year,  Jaden will be twice as old as Florence.  Solve for their ages now.


a. 14, 8

b. 13, 7

c. 11, 5  --- answer 

d. 12, 6


Solution: 


let 

J = Jaden's age now

F =  Florence's age now


equation1: 

their ages now


J = 6 + F



equation2: 

their ages 1 year from now


J + 1 = 2 (F + 1) 



substitute the value of J in equation1 into equation2 


(6 + F) + 1 = 2 (F + 1)

6 + F + 1 = 2F + 2 

7 - 2 = 2F - F

5 = F

F = 5



solve for J in equation1 using the value of F = 5


J = 6 + F 

J = 6 + 5 

J = 11


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