Multiple choice

A financial advisor, Mr. Brian noticed that his annual income from interest on investments had decreased due to a change in the market interest rates. Previously, his investments earned him an annual return at a rate of 10%, but due to recent economic shifts, the interest rate dropped to 6%. This change resulted in a decrease of $120 in his annual income. What was the original amount of capital Mr. Brian had invested?

  1. $3,000
  2. $4,000
  3. $5,000
  4. $6,000
  5. $6,500
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A Correct answer
Explanation

Let P be the principal. The decrease in interest is 10% of P - 6% of P = 4% of P. Given 0.04 * P = 120, P = 120 / 0.04 = 3000.

AI explanation

Let the original capital be P, so the drop in interest income is 10% of P minus 6% of P, which equals \$120. This simplifies to 4% of P = 120, or 0.04 times P = 120. Solving for P gives 120 divided by 0.04, which means the original amount invested was \$3,000.

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