Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized for You

we will pick new questions that match your level based on your Timer History

Track Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

It appears that you are browsing the GMAT Club forum unregistered!

Signing up is free, quick, and confidential.
Join other 500,000 members and get the full benefits of GMAT Club

Registration gives you:

Tests

Take 11 tests and quizzes from GMAT Club and leading GMAT prep companies such as Manhattan GMAT,
Knewton, and others. All are free for GMAT Club members.

Applicant Stats

View detailed applicant stats such as GPA, GMAT score, work experience, location, application
status, and more

Books/Downloads

Download thousands of study notes,
question collections, GMAT Club’s
Grammar and Math books.
All are free!

Thank you for using the timer!
We noticed you are actually not timing your practice. Click the START button first next time you use the timer.
There are many benefits to timing your practice, including:

An investment receives 20% annual interest compounded semi-a [#permalink]

Show Tags

17 Dec 2012, 17:41

2

This post was BOOKMARKED

00:00

A

B

C

D

E

Difficulty:

65% (hard)

Question Stats:

53% (02:46) correct
47% (02:02) wrong based on 74 sessions

HideShow timer Statistics

An investment receives 20% annual interest compounded semi-annually for 2 years. If its final value is $29,200, approximately what was the initial investment?

A. $ 17,000 B. $ 18,000 C. $ 19,000 D. $ 20,000 E. $ 21,000

Re: An investment receives 20% annual interest compounded semi-a [#permalink]

Show Tags

17 Dec 2012, 19:30

2

This post received KUDOS

danzig wrote:

An investment receives 20% annual interest compounded semi-annually for 2 years. If its final value is $29,200, approximately what was the initial investment?

A. $ 17,000 B. $ 18,000 C. $ 19,000 D. $ 20,000 E. $ 21,000

A fast method to solve it? Thanks!

Formula to calculate compound interest: \(A=P[1 + R/100]^t\) Where P= initial amount R= annual rate t=time given

Whenever we are supposed to calculate the quarterly CI or semi-annually CI, remember one thing: For quarterly calculations: Divide the rate by 4 and multiply the time by 4 For semi-annually calculations: Divide the rate by 2 and multiply the time by 2.

On applying the mentioned concept: \(29200=P * (1.1)^4\)

\((1.1)^4 is 1.4\) approximately. In order to make the calculations simpler, because the question is asking "approximately", we can assume this 1.4 as 1.46. This is because 1.46*2=2.92.

Now on solving, we get P as 20000. Hope that helps.
_________________

Re: An investment receives 20% annual interest compounded semi-a [#permalink]

Show Tags

18 Dec 2012, 07:43

2

This post received KUDOS

Marcab wrote:

danzig wrote:

An investment receives 20% annual interest compounded semi-annually for 2 years. If its final value is $29,200, approximately what was the initial investment?

A. $ 17,000 B. $ 18,000 C. $ 19,000 D. $ 20,000 E. $ 21,000

A fast method to solve it? Thanks!

Formula to calculate compound interest: \(A=P[1 + R/100]^t\) Where P= initial amount R= annual rate t=time given

Whenever we are supposed to calculate the quarterly CI or semi-annually CI, remember one thing: For quarterly calculations: Divide the rate by 4 and multiply the time by 4 For semi-annually calculations: Divide the rate by 2 and multiply the time by 2.

On applying the mentioned concept: \(29200=P * (1.1)^4\)

\((1.1)^4 is 1.4\) approximately. In order to make the calculations simpler, because the question is asking "approximately", we can assume this 1.4 as 1.46. This is because 1.46*2=2.92.

Now on solving, we get P as 20000. Hope that helps.

You are explanation Marcab is really good (indeed it is).

At the same time the key concept to keep in mind is that interest compound annually, semestral and so on are simply % increase or decrease, one after another.

Similarly, we have 100 and we have a discount of 20% and then 10 % . We have , of course, 80 and after this 10% of 80.

Here is the same.

here we have 20% 2 times per year so: 10% or 1.1 for two years. \(1.1^4\)or 1.1 four times.

if we have the original amount X and the finel amount 29,200. We need only to divide\(\frac{29,200}{1.1}\) the result again 1.1 for four times.the result is \(19943\). We have approximately.

D is the answer.

Thinking about compound interest as successive % is pretty straight. That's it
_________________

Re: An investment receives 20% annual interest compounded semi-a [#permalink]

Show Tags

18 Dec 2012, 17:44

Could you explain with more detail this part, please? How did you find that \(1.1^4 = 1.4\) without making the calculations? Also, I don't understand why you mentioned this: 1.46*2 = 2.92. Thanks!

Marcab wrote:

\((1.1)^4 is 1.4\) approximately. In order to make the calculations simpler, because the question is asking "approximately", we can assume this 1.4 as 1.46. This is because 1.46*2=2.92.

Re: An investment receives 20% annual interest compounded semi-a [#permalink]

Show Tags

18 Dec 2012, 17:54

danzig wrote:

Could you explain with more detail this part, please? How did you find that \(1.1^4 = 1.4\) without making the calculations? Also, I don't understand why you mentioned this: 1.46*2 = 2.92. Thanks!

Marcab wrote:

\((1.1)^4 is 1.4\) approximately. In order to make the calculations simpler, because the question is asking "approximately", we can assume this 1.4 as 1.46. This is because 1.46*2=2.92.

Please danzing refer to my previous post. Is all explained well and totally.

Re: An investment receives 20% annual interest compounded semi-a [#permalink]

Show Tags

18 Dec 2012, 19:12

2

This post received KUDOS

Hii danzig. See there is a pattern: 1.1^1=1.1, 1.1^2~1.2, 1.1^3~1.3, 1.4^4~1.4 since the question is asking "approximately" therefore I change 1.4 to 1.46. Why only 1.46? Because 1.46 *2=2.92. Since the final is given in terms of 292 only, therefore It simplifies the calculation Hope that helps.
_________________

Re: An investment receives 20% annual interest compounded semi-a [#permalink]

Show Tags

11 Jul 2016, 10:19

Hello from the GMAT Club BumpBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
_________________

Since my last post, I’ve got the interview decisions for the other two business schools I applied to: Denied by Wharton and Invited to Interview with Stanford. It all...

[rss2posts title=The MBA Manual title_url=https://mbamanual.com/2016/11/22/mba-vs-mim-guest-post/ sub_title=MBA vs. MiM :3qa61fk6]Hey, guys! We have a great guest post by Abhyank Srinet of MiM-Essay . In a quick post and an...

Marketing is one of those functions, that if done successfully, requires a little bit of everything. In other words, it is highly cross-functional and requires a lot of different...