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# If money is invested at r percent interest, compounded annua

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If money is invested at r percent interest, compounded annua [#permalink]

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17 Dec 2012, 06:46
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If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested $5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college? (A)$20000
(B) $15000 (C)$12000
(D) $10000 (E)$9000
[Reveal] Spoiler: OA
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Re: If money is invested at r percent interest, compounded annua [#permalink]

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17 Dec 2012, 06:48
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If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested $5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college? (A)$20000
(B) $15000 (C)$12000
(D) $10000 (E)$9000

Since investment doubles in 70/r years, then for r=8 it'll double in 70/8=~9 years (we are not asked about the exact amount so such an approximation will do). Thus in 18 years investment will double twice and become ($5,000*2)*2=$20,000 (after 9 years investment will become $5,000*2=$10,000 and in another 9 years it'll become $10,000*2=$20,000).

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Re: If money is invested at r percent interest, compounded annua [#permalink]

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25 Jun 2014, 12:12
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).

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Re: If money is invested at r percent interest, compounded annua [#permalink]

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25 Jun 2014, 23:37
It's very important to pay attention to the wordings as first I thought that the compound interest formula needs to be applied.

Though I read the question again and got it correct

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Re: If money is invested at r percent interest, compounded annua [#permalink]

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24 Aug 2014, 15:25
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I think without the 1st sentence, we still can guess the answer easily.

$5,000 at 8%/year =$400/year --> 10-years interest will be $4,000, 20 years will be$8,000
Since the interest compounded annually in 18 years (very long period), the total value would be >$18,000 --> eliminate B,C,D,E Intern Joined: 12 Jun 2014 Posts: 1 Location: United States Concentration: Finance, Economics GMAT 1: 650 Q50 V28 GMAT 2: 720 Q50 V37 GPA: 3.85 Followers: 0 Kudos [?]: 0 [0], given: 26 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 10 Oct 2014, 20:42 should be so easy for business students...especially finance SVP Status: The Best Or Nothing Joined: 27 Dec 2012 Posts: 1858 Location: India Concentration: General Management, Technology WE: Information Technology (Computer Software) Followers: 37 Kudos [?]: 1660 [0], given: 193 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 22 Oct 2014, 00:35 5000 will multiply approx. 4 times = 5000 * 4 = 20000 Answer = A _________________ Kindly press "+1 Kudos" to appreciate GMAT Club Legend Joined: 09 Sep 2013 Posts: 11096 Followers: 511 Kudos [?]: 134 [0], given: 0 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 22 Dec 2015, 11:12 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. _________________ EMPOWERgmat Instructor Status: GMAT Assassin/Co-Founder Affiliations: EMPOWERgmat Joined: 19 Dec 2014 Posts: 7170 Location: United States (CA) GMAT 1: 800 Q51 V49 GRE 1: 340 Q170 V170 Followers: 312 Kudos [?]: 2125 [0], given: 161 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 25 Dec 2015, 12:07 Hi All, This question has some similarities to "symbolism" questions (in which the prompt shows you a "made up" symbol, tells you what it means and asks you to do a simple calculation with it). The easiest way to tackle the question is to simply follow the instructions. We're told that r = percent interest. We're also told that an investment with DOUBLE in approximately 70/r years. We're told to invest$5,000 at 8 percent for 18 years.

Plug in r = 8

70/8 is about 9 years, meaning our investment will DOUBLE in 9 years.

In the first 9 years, $5,000 doubles to$10,0000
In the next 9 years, $10,000 doubles to$20,000

[Reveal] Spoiler:
A

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(A) $20000 (B)$15000
(C) $12000 (D)$10000
(E) $9000 Although this question appears as if we may have to do a lot of calculating, we actually do not. Focus on the first sentence of the question stem. We are given that if money is invested at r percent interest, compounded annually, the amount of investment will double in approximately 70/r years. We are then given that Pat’s parents invest$5,000 at 8 percent interest. It follows that the investment will double after 70/8 years, which is roughly 9 years. With an initial investment of $5,000, the investment will double to$10,000 in about 9 years. In another 9 years (a total of 18 years) the investment will double again to about $20,000. Answer A _________________ Jeffrey Miller Jeffrey Miller Head of GMAT Instruction Re: If money is invested at r percent interest, compounded annua [#permalink] 16 Jun 2016, 06:11 Similar topics Replies Last post Similar Topics: If John invested$ 1 at 5 percent interest compounded annually, the to 2 27 Dec 2015, 09:42
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