If money is invested at r percent interest, compounded annua : GMAT Problem Solving (PS)
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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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27 Jan 2013, 22:46
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If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 50/r years. If Luke's parents invested $12,500 in a long term bond that pays 12 percent interest compounded annually, what will be the approximate total amount of the investment 12 years later, when Luke is ready for college? A) 62,000 B) 85,500 C) 95,500 D) 100,500 E) 100,000 Don't be rude people, leave your kudo's here! [Reveal] Spoiler: OA Math Expert Joined: 02 Sep 2009 Posts: 35950 Followers: 6863 Kudos [?]: 90116 [1] , given: 10418 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 27 Jan 2013, 23:19 1 This post received KUDOS Expert's post laythesmack23 wrote: If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 50/r years. If Luke's parents invested$12,500 in a long term bond that pays 12 percent interest compounded annually, what will be the approximate total amount of the investment 12 years later, when Luke is ready for college?

A) 62,000
B) 85,500
C) 95,500
D) 100,500
E) 100,000

Don't be rude people, leave your kudo's here!

Proper version of this question is from from Official Guide:
If money is invested at r percent interest, compounded annually, the amount of investment will double in approximately 70/r years. If Pat's parents invested $5000 in a long term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of 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).

Answer: A.

Discussed here: if-money-is-invested-at-r-percent-interest-compounded-annual-104225.html
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Re: If money is invested at r percent interest, compounded annua [#permalink]

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30 Mar 2014, 21:54
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gauravkaushik8591 wrote:
VeritasPrepKarishma wrote:
gauravkaushik8591 wrote:
Answer equals E in 48 years. I thought by 50th year it would reach 100,500. Options should have been separated more widely for clarity.

This question is not correct since with compound interest, amount doubles every 70/n years (good to remember this - comes in handy sometimes). This cannot be changed to 50/n. The actual OG question has 70/n - they give it because they don't expect you to know it. There are no problems with the OG question given by Bunuel in the post above. Try that out instead.

Karishma,

I totally understand what you said. Thanks for clarification. But since the question bent the formula to 50/n, I started treating it like an exponential growth and decay question.

Yes, but the question still mentions that the interest is 'compounded'. Let that raise a red flag in future!
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Get started with Veritas Prep GMAT On Demand for $199 Veritas Prep Reviews Manager Joined: 24 Oct 2013 Posts: 181 Location: Canada Schools: LBS '18 GMAT 1: 720 Q49 V38 WE: Design (Transportation) Followers: 7 Kudos [?]: 34 [1] , given: 83 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 30 Mar 2014, 21:57 1 This post received KUDOS VeritasPrepKarishma wrote: Yes, but the question still mentions that the interest is 'compounded'. Let that raise a red flag in future! Will keep that in mind and add it to my error log. Thank you so much. : ) Moderator Joined: 02 Jul 2012 Posts: 1231 Location: India Concentration: Strategy GMAT 1: 740 Q49 V42 GPA: 3.8 WE: Engineering (Energy and Utilities) Followers: 115 Kudos [?]: 1363 [0], given: 116 Re: If money is invested at "r" percent interest, compounded.... [#permalink] ### Show Tags 27 Jan 2013, 23:05 Can you provide the source of the question?.. I believe the answers are clustered together too closely to make viable options for an approximation question. _________________ Did you find this post helpful?... Please let me know through the Kudos button. Thanks To The Almighty - My GMAT Debrief GMAT Reading Comprehension: 7 Most Common Passage Types Manager Joined: 17 Jul 2010 Posts: 124 Followers: 1 Kudos [?]: 44 [0], given: 43 Re: If money is invested at "r" percent interest, compounded.... [#permalink] ### Show Tags 31 Jan 2013, 15:06 MacFauz wrote: Can you provide the source of the question?.. I believe the answers are clustered together too closely to make viable options for an approximation question. OG guide, please see original question that Banuel listed above. I simply changed the #'s around, and changed the answer's to fit my revised question. Laythesmack23 Moderator Joined: 02 Jul 2012 Posts: 1231 Location: India Concentration: Strategy GMAT 1: 740 Q49 V42 GPA: 3.8 WE: Engineering (Energy and Utilities) Followers: 115 Kudos [?]: 1363 [0], given: 116 Re: If money is invested at "r" percent interest, compounded.... [#permalink] ### Show Tags 31 Jan 2013, 22:22 laythesmack23 wrote: MacFauz wrote: Can you provide the source of the question?.. I believe the answers are clustered together too closely to make viable options for an approximation question. OG guide, please see original question that Banuel listed above. I simply changed the #'s around, and changed the answer's to fit my revised question. Laythesmack23 Understood.. Although the 70/N part should not be changed because then, the interest rate would not be in line with a compound interest... Otherwise the question is fine... I believe the answer choices should be more widely spread apart.. Using the formula for compound interest "C" will actually be closest value to the actual answer... _________________ Did you find this post helpful?... Please let me know through the Kudos button. Thanks To The Almighty - My GMAT Debrief GMAT Reading Comprehension: 7 Most Common Passage Types Manager Joined: 24 Oct 2013 Posts: 181 Location: Canada Schools: LBS '18 GMAT 1: 720 Q49 V38 WE: Design (Transportation) Followers: 7 Kudos [?]: 34 [0], given: 83 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 30 Mar 2014, 18:29 Answer equals E in 48 years. I thought by 50th year it would reach 100,500. Options should have been separated more widely for clarity. Veritas Prep GMAT Instructor Joined: 16 Oct 2010 Posts: 7076 Location: Pune, India Followers: 2091 Kudos [?]: 13312 [0], given: 222 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 30 Mar 2014, 19:17 gauravkaushik8591 wrote: Answer equals E in 48 years. I thought by 50th year it would reach 100,500. Options should have been separated more widely for clarity. This question is not correct since with compound interest, amount doubles every 70/n years (good to remember this - comes in handy sometimes). This cannot be changed to 50/n. The actual OG question has 70/n - they give it because they don't expect you to know it. There are no problems with the OG question given by Bunuel in the post above. Try that out instead. _________________ Karishma Veritas Prep | GMAT Instructor My Blog Get started with Veritas Prep GMAT On Demand for$199

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

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30 Mar 2014, 19:49
VeritasPrepKarishma wrote:
gauravkaushik8591 wrote:
Answer equals E in 48 years. I thought by 50th year it would reach 100,500. Options should have been separated more widely for clarity.

This question is not correct since with compound interest, amount doubles every 70/n years (good to remember this - comes in handy sometimes). This cannot be changed to 50/n. The actual OG question has 70/n - they give it because they don't expect you to know it. There are no problems with the OG question given by Bunuel in the post above. Try that out instead.

Karishma,

I totally understand what you said. Thanks for clarification. But since the question bent the formula to 50/n, I started treating it like an exponential growth and decay question.
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If money is invested at r percent interest, compounded annua [#permalink]

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07 Jan 2015, 13:03
Dividing 70/8 yields 8.75 years. So, in 8.75 years 5,000 would become 10,000. In another 8.75 years the amount would become 20,000.

Since by now 17.5 is almost equal to 18, the answer is A: 20,000.
If money is invested at r percent interest, compounded annua   [#permalink] 07 Jan 2015, 13:03
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