Find all School-related info fast with the new School-Specific MBA Forum

 It is currently 06 Oct 2015, 19:08

### GMAT Club Daily Prep

#### 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

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# If money is invested at r percent interest compounded annual

 Question banks Downloads My Bookmarks Reviews Important topics
Author Message
TAGS:
Manager
Status: GMAT Preperation
Joined: 04 Feb 2010
Posts: 105
Concentration: Social Entrepreneurship, Social Entrepreneurship
GPA: 3
WE: Consulting (Insurance)
Followers: 2

Kudos [?]: 62 [2] , given: 15

If money is invested at r percent interest compounded annual [#permalink]  04 Nov 2010, 03:53
2
This post received
KUDOS
1
This post was
BOOKMARKED
00:00

Difficulty:

25% (medium)

Question Stats:

77% (02:09) correct 23% (01:46) wrong based on 213 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
[Reveal] Spoiler: OA

Last edited by Bunuel on 09 Sep 2012, 01:48, edited 1 time in total.
Edited the question.
Veritas Prep GMAT Instructor
Joined: 16 Oct 2010
Posts: 5962
Location: Pune, India
Followers: 1525

Kudos [?]: 8407 [4] , given: 193

Re: compounded annually .. spending too much time [#permalink]  04 Nov 2010, 05:21
4
This post received
KUDOS
Expert's post
1
This post was
BOOKMARKED
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 Get started with Veritas Prep GMAT On Demand for$199

Veritas Prep Reviews

Senior Manager
Joined: 20 Jan 2010
Posts: 278
Schools: HBS, Stanford, Haas, Ross, Cornell, LBS, INSEAD, Oxford, IESE/IE
Followers: 15

Kudos [?]: 173 [2] , given: 117

Re: compounded annually .. spending too much time [#permalink]  04 Nov 2010, 08:41
2
This post received
KUDOS
Answer: A
Karishma 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-QA2rkpBSY
Hope 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??

Math Expert
Joined: 02 Sep 2009
Posts: 29750
Followers: 4894

Kudos [?]: 53384 [1] , given: 8155

Re: Compound Amount [#permalink]  13 Feb 2011, 12:05
1
This post received
KUDOS
Expert's post
1
This post was
BOOKMARKED
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.
_________________
EMPOWERgmat Instructor
Status: GMAT Assassin/Co-Founder
Affiliations: EMPOWERgmat
Joined: 19 Dec 2014
Posts: 3933
Location: United States (CA)
GMAT 1: 800 Q51 V49
GRE 1: 340 Q170 V170
Followers: 168

Kudos [?]: 1059 [1] , given: 58

Re: If money is invested at r percent interest compounded annual [#permalink]  03 Mar 2015, 22:35
1
This post received
KUDOS
Expert's post
Hi ColdSushi,

GMAT Quant questions (and the accompanying answer choices) are always carefully written. Sometimes they offer hints as to how you can use estimation to get to the correct answer.

Here, the word 'approximate' in the prompt is essentially telling you to estimate an answer. With an interest rate of 8% and the given formula, you're meant to estimate that the investment will double in 70/8 = about 9 years. The question then asks for the total investment after 18 years. THAT number (18) is not an accident - it was specifically chosen so that you can take advantage of your estimation.

Start = $5000 After 9 years =$10,000
After 18 years = $20,000 Final Answer: [Reveal] Spoiler: A GMAT assassins aren't born, they're made, Rich _________________ Senior Manager Joined: 10 Nov 2010 Posts: 269 Location: India Concentration: Strategy, Operations GMAT 1: 520 Q42 V19 GMAT 2: 540 Q44 V21 WE: Information Technology (Computer Software) Followers: 5 Kudos [?]: 142 [0], given: 22 Compound Amount [#permalink] 13 Feb 2011, 11:52 Pls check the image attached Attachments CA.JPG [ 37.48 KiB | Viewed 7558 times ] _________________ The proof of understanding is the ability to explain it. 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, 20:07 How do you know to divide by 8 and not .08? Senior Manager Joined: 15 Jun 2010 Posts: 368 Schools: IE'14, ISB'14, Kellogg'15 WE 1: 7 Yrs in Automobile (Commercial Vehicle industry) Followers: 10 Kudos [?]: 247 [0], given: 50 Re: compounded annually .. spending too much time [#permalink] 08 Sep 2012, 22:50 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: 76
Location: India
Concentration: Strategy, General Management
GMAT 1: 670 Q49 V33
WE: Asset Management (Manufacturing)
Followers: 2

Kudos [?]: 90 [0], given: 5

Re: If money is invested at r percent interest compounded annual [#permalink]  09 Sep 2012, 04:44
1
This post was
BOOKMARKED
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, $$Simple Interest (SI) = P*r*t$$

For 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?

GMAT Club Legend
Joined: 09 Sep 2013
Posts: 6750
Followers: 365

Kudos [?]: 82 [0], given: 0

Re: If money is invested at r percent interest compounded annual [#permalink]  07 Feb 2014, 07:03
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.
_________________
GMAT Club Legend
Joined: 09 Sep 2013
Posts: 6750
Followers: 365

Kudos [?]: 82 [0], given: 0

Re: If money is invested at r percent interest compounded annual [#permalink]  17 Feb 2015, 11:43
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.
_________________
Intern
Joined: 15 Jan 2015
Posts: 25
Followers: 0

Kudos [?]: 7 [0], given: 1

Re: If money is invested at r percent interest compounded annual [#permalink]  18 Feb 2015, 01:07
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

Amount will get doubled after (70/8) years or 8.75 years
Amount after 8.75 years = 2*5000 = 10000
Amount after 17.5 years = 2*10000 = 20000

Amount after 18 years will be approx to 20000.

Answer A
Intern
Joined: 29 Oct 2014
Posts: 22
Followers: 0

Kudos [?]: 7 [0], given: 13

Re: If money is invested at r percent interest compounded annual [#permalink]  03 Mar 2015, 22:12
Hey all,

Just wondering what in the question made you realise you should solve this question via 5,000 x 2 x 2 rather than using the actual interest formula? i.e. P(1+r/n)^nt?

I used the formula then realised the calcs were too complicated.

Thanks in advance for your help.
Senior Manager
Status: Math is psycho-logical
Joined: 07 Apr 2014
Posts: 447
Location: Netherlands
GMAT Date: 02-11-2015
WE: Psychology and Counseling (Other)
Followers: 1

Kudos [?]: 59 [0], given: 169

Re: If money is invested at r percent interest compounded annual [#permalink]  04 Mar 2015, 03:38
SOURH7WK wrote:
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? Also, I guess that even if you did 70 / 0.08 and ended up in 875, this would have alarmed you that it is not possible to wait 875 years for the amount of the investment to doulbe... Even like this, the next thought would be to divide by 8. Intern Joined: 29 Oct 2014 Posts: 22 Followers: 0 Kudos [?]: 7 [0], given: 13 Re: If money is invested at r percent interest compounded annual [#permalink] 04 Mar 2015, 16:30 EMPOWERgmatRichC wrote: Hi ColdSushi, GMAT Quant questions (and the accompanying answer choices) are always carefully written. Sometimes they offer hints as to how you can use estimation to get to the correct answer. Here, the word 'approximate' in the prompt is essentially telling you to estimate an answer. With an interest rate of 8% and the given formula, you're meant to estimate that the investment will double in 70/8 = about 9 years. The question then asks for the total investment after 18 years. THAT number (18) is not an accident - it was specifically chosen so that you can take advantage of your estimation. Start =$5000
After 9 years = $10,000 After 18 years =$20,000

Rich

Ah - ok thank you Rich. I def need to pay more attention to these hints.

I find myself 60-70% "there" in solving a question i.e. I'd know what the question is asking and the end point (as opposed to 15-20% "there" when I first started studying for the GMAT) but get stuck because I'd miss an important word or picked a harder way to approach a problem. Hopefully things will get better with practice!
Re: If money is invested at r percent interest compounded annual   [#permalink] 04 Mar 2015, 16:30
Similar topics Replies Last post
Similar
Topics:
5 Money invested at x%, compounded annually, triples in value in approxi 8 24 Aug 2015, 22:46
2 An investment compounds annually at an interest rate of 34.1 5 22 Jun 2013, 21:45
5 If money is invested at r percent interest, compounded annua 10 27 Jan 2013, 22:46
12 If money is invested at r percent interest, compounded annua 6 17 Dec 2012, 05:46
2 A total of 1000\$ was invested at compounded annual interest rate. At 4 26 Aug 2011, 22:49
Display posts from previous: Sort by

# If money is invested at r percent interest compounded annual

 Question banks Downloads My Bookmarks Reviews Important topics

 Powered by phpBB © phpBB Group and phpBB SEO Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.