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If 10,000 dollars is invested at x% annual interest for n

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Senior Manager
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If 10,000 dollars is invested at x% annual interest for n [#permalink]

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New post 16 Sep 2006, 17:56
This topic is locked. If you want to discuss this question please re-post it in the respective forum.

If 10,000 dollars is invested at x% annual interest for n years, which of the following represents the amount of interest in dollars that will be earned by the investment in the n years?

a) 10,000 (x^n)

b) 10,000n (x/100)

c) 10,000n (1+(x/100))

d) 10,000 (x/100)^n

e) 10,000 (1 + (x/100))^n

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Re: GMAT prep - compound interest [#permalink]

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New post 16 Sep 2006, 18:16
I am not sure if this is compound interest?? This seems like Simple interest to me

SI = 10000 * n * x/100

Hence B

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New post 16 Sep 2006, 18:21
Heman, thanks.

Could you explain difference between compound interest vs simple interest?

I think I see where I went wrong - I was choosing e) - the question asks for the interest - not the total value after n years.
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New post 16 Sep 2006, 18:22
compound interest formula is
A(1+r)^n

but the question asks for the interest only

so 10000(1+x/100)^n - 10000
but am stuck here
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Re: GMAT prep - compound interest [#permalink]

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New post 17 Sep 2006, 04:23
Strictly speaking, it needs to be stated if the interest is compounded or simple.

if it is simple it's D. if it's compounded it's E


MBAlad wrote:
If 10,000 dollars is invested at x% annual interest for n years, which of the following represents the amount of interest in dollars that will be earned by the investment in the n years?

a) 10,000 (x^n)

b) 10,000n (x/100)

c) 10,000n (1+(x/100))

d) 10,000 (x/100)^n

e) 10,000 (1 + (x/100))^n

Can someone also tell me how to post the screen grabs from GMAT prep?

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"Amicus Plato, sed magic amica veritas"

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New post 17 Sep 2006, 09:48
Mikhail Bondarenko wrote:
Strictly speaking, it needs to be stated if the interest is compounded or simple.

if it is simple it's D. if it's compounded it's E




Can you explain how D would give you the interest after n years. I think it should be B

OA?

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New post 17 Sep 2006, 20:32
This problem is definitely a simple interest problem and the answer is B.

One important difference to understand is that in simple interest the interest is charged on the principle amount only whereas in compound interest the interest is charged on the Principal Amount + interest in each compounding period.

For example if the same problem asked to find Compund interest compounded quarterly the answer would be. It is essential to know the recurring period for which interest will be compounded.

10,000 * (1 + i) ^ n*4

n*4 is the no. of quarters one would have in n years.
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