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Topic: An old SAT problem
Replies: 11   Last Post: Apr 11, 2007 4:37 PM

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Pubkeybreaker

Posts: 1,416
Registered: 2/12/07
Re: An old SAT problem
Posted: Apr 10, 2007 10:46 AM
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quasi wrote:
> On 9 Apr 2007 19:57:43 -0700, jan.amos@yahoo.com wrote:
>

> >
> >I ran across old (1926) SAT math problems and
> >one of them puzzles me -- it's stated as follows:
> >
> > A man buys a house and lot for $8,500 but is obliged to pay
> > $500 back taxes on the property. He leases the property at the
> > rate of $75 a month. What rate of interest does this investment
> > bear?
> >
> >I think I'm missing something here -- any clue?
> >
> > - Jan

>
> How much was the total amount invested?
>
> How much income does he earn in 1 year?
>
> The simple annual interest rate is just the annual income expressed as
> a percent of the investment.


Yes, but the problem is poorly posed. It did not ask for the simple
annual rate.
It just asked for "rate of interest". The answer to this question
depends on a lot
of unstated assumptions/questions.

(1) Was the $75/month received also invested? Was the $75 received at
the *start* or the *end* of
each month? If the $75/month was also invested, at what rate was it
invested?
(2) Was the interest compounded monthly? etc.

etc.

To get the total return depends on these questions. The question did
not ask for *simple annual return*.




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