|
Author |
Message |
|
TAGS:
|
|
|
Manager
Status: GMAT Preperation
Joined: 04 Feb 2010
Posts: 105
Schools: HBS, Tuck
Followers: 1
Kudos [?]:
2
[0], given: 15
|
If money is invested at r percent interest compounded annual [#permalink]
 04 Nov 2010, 04:53
Question Stats:
74% (02:23) correct
25% (03:05) wrong based on 1 sessions
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
Last edited by Bunuel on 09 Sep 2012, 02:48, edited 1 time in total.
Edited the question.
|
|
|
|
|
|
|
Veritas Prep GMAT Instructor
Joined: 16 Oct 2010
Posts: 3105
Location: Pune, India
Followers: 567
Kudos [?]:
1994
[1] , given: 92
|
Re: compounded annually .. spending too much time [#permalink]
04 Nov 2010, 06:21
1
This post received
KUDOS
vanidhar wrote: 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) $20,000
(B) $1 5,000
(C) $1 2,000
(D) $1 0,000
(E) $ 9,000 There has to be a logic to why they gave you "If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years." If r = 8%, the principal will double in 70/8 = apprx 9 years. So in 9 years, 5000 will become 10,000. In another 9 years (i.e. 18 years from now) principal will double again and become $20,000.
_________________
Karishma
Veritas Prep | GMAT Instructor
My Blog
Save 10% on Veritas Prep GMAT Courses And Admissions Consulting
Enroll now. Pay later. Take advantage of Veritas Prep's flexible payment plan options.
Veritas Prep Reviews
|
|
|
|
|
|
Senior Manager
Joined: 20 Jan 2010
Posts: 282
Schools: HBS, Stanford, Haas, Ross, Cornell, LBS, INSEAD, Oxford, IESE/IE
Followers: 10
Kudos [?]:
99
[0], given: 117
|
Re: compounded annually .. spending too much time [#permalink]
04 Nov 2010, 09:41
Answer: AKarishma has already explained very well and I would like to add some fact here that would be valuable for our daily life problems. This fact of doubling investment (or growth) after every \frac{70}{r} where r is the %age growth or change per unit time, holds true for real life economy calculations. This isn't just true for this particular question but is actually true for our daily life. Check out the following video link (amazing facts) http://www.youtube.com/watch?v=F-QA2rkpBSYHope it helps
_________________
"Don't be afraid of the space between your dreams and reality. If you can dream it, you can make it so."
Target=780
http://challengemba.blogspot.com
Kudos??
|
|
|
|
|
|
Senior Manager
Joined: 10 Nov 2010
Posts: 270
Location: India
Concentration: Strategy, Operations
GMAT 1: 520 Q42 V19
GMAT 2: 540 Q44 V21
WE: Information Technology (Computer Software)
Followers: 4
Kudos [?]:
19
[0], given: 22
|
Pls check the image attached
Attachments
CA.JPG [ 37.48 KiB | Viewed 1775 times ]
_________________
The proof of understanding is the ability to explain it.
|
|
|
|
|
|
GMAT Club team member
Joined: 02 Sep 2009
Posts: 11516
Followers: 1791
Kudos [?]:
9536
[0], given: 826
|
Re: Compound Amount [#permalink]
13 Feb 2011, 13:05
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.
_________________
PLEASE READ AND FOLLOW: 11 Rules for Posting!!!
RESOURCES: [GMAT MATH BOOK]; 1. Triangles; 2. Polygons; 3. Coordinate Geometry; 4. Factorials; 5. Circles; 6. Number Theory
COLLECTION OF QUESTIONS:
PS: 1. Tough and Tricky questions; 2. Hard questions; 3. Hard questions part 2; 4. Standard deviation; 5. Tough Problem Solving Questions With Solutions; 6. Probability and Combinations Questions With Solutions; 7 Tough and tricky exponents and roots questions; 8 12 Easy Pieces (or not?); 9 Bakers' Dozen; 10 Algebra set. NEW!!!
DS: 1. DS tough questions; 2. DS tough questions part 2; 3. DS tough questions part 3; 4. DS Standard deviation; 5. Inequalities; 6. 700+ GMAT Data Sufficiency Questions With Explanations; 7 Tough and tricky exponents and roots questions; 8 The Discreet Charm of the DS ; 9 Devil's Dozen!!!; 10 Number Properties set. NEW!!!
What are GMAT Club Tests?
25 extra-hard Quant Tests
Find out what's new at GMAT Club - latest features and updates
|
|
|
|
|
|
Intern
Joined: 31 Aug 2012
Posts: 6
Followers: 0
Kudos [?]:
0
[0], given: 0
|
Re: compounded annually .. spending too much time [#permalink]
08 Sep 2012, 21:07
How do you know to divide by 8 and not .08?
|
|
|
|
|
|
Senior Manager
Joined: 15 Jun 2010
Posts: 361
Schools: IE'14, ISB'14, Kellogg'15
WE 1: 7 Yrs in Automobile (Commercial Vehicle industry)
Followers: 4
Kudos [?]:
80
[0], given: 50
|
Re: compounded annually .. spending too much time [#permalink]
08 Sep 2012, 23:50
go2013gmat wrote: How do you know to divide by 8 and not .08? Pay attention to the question stem. The relationship is in %age. So no need to divide it by 100. 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?
_________________
Regards
SD
-----------------------------
Press Kudos if you like my post.
Debrief 610-540-580-710(Long Journey): from-600-540-580-710-finally-achieved-in-4th-attempt-142456.html
|
|
|
|
|
|
Manager
Joined: 24 Jul 2011
Posts: 77
Location: India
Concentration: Strategy, General Management
GMAT 1: 670 Q49 V33
WE: Asset Management (Manufacturing)
Followers: 2
Kudos [?]:
37
[0], given: 5
|
Re: If money is invested at r percent interest compounded annual [#permalink]
09 Sep 2012, 05:44
Just to brush up a little theory about Simple and Compound Interests calculation. If P= Principle amount invested r= annual rate of interest ( For 8% annual rate of interest r=8) t= time period in years. Then, Simple Interest (SI) = P*r*tFor calculation of Compound Interest calculation- if A=accumulated amount (principle + all interest) Then, A= P*( 1 + {r/100})^t
_________________
My mantra for cracking GMAT:
Everyone has inborn talent, however those who complement it with hard work we call them 'talented'.
+1 Kudos = Thank You Dear 
Are you saying thank you?
|
|
|
|
|
|
|
Re: If money is invested at r percent interest compounded annual
[#permalink]
09 Sep 2012, 05:44
|
|
|
|
|
|
|
|
|
|
|
close
