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Lucy invested $10,000 in a new mutual fund account exactly [#permalink]
03 Sep 2012, 04:47

Expert's post

1

This post was BOOKMARKED

00:00

A

B

C

D

E

Difficulty:

5% (low)

Question Stats:

77% (02:20) correct
23% (01:09) wrong based on 366 sessions

Lucy invested $10,000 in a new mutual fund account exactly three years ago. The value of the account increased by 10 percent during the first year, increased by 5 percent during the second year, and decreased by 10 percent during the third year. What is the value of the account today?

Re: Lucy invested $10,000 in a new mutual fund account exactly [#permalink]
03 Sep 2012, 04:47

2

This post received KUDOS

Expert's post

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SOLUTION

Lucy invested $10,000 in a new mutual fund account exactly three years ago. The value of the account increased by 10 percent during the first year, increased by 5 percent during the second year, and decreased by 10 percent during the third year. What is the value of the account today?

The value of the account today would be 10,000*1.1*1.05*0.9. Now, the question is how to calculate this efficiently.

10,000*1.1*1.05*0.9=10,000*\frac{11}{10}*\frac{105}{100}*\frac{9}{10}=10,000*\frac{11*105*9}{10,000} --> 10,000 will cancel and we'll get: 11*105*9=(9*11)*105=99*105=(100-1)*105=10,500-105=10,395.

Re: Lucy invested $10,000 in a new mutual fund account exactly [#permalink]
03 Sep 2012, 05:07

Value after 1 year: 10,000 * 1.1 = 11,000 Value after 2 years: 11,000 * 1.05 = 11,550 Value today: 11,550 * 0.9 = 10,395

Answer B is correct.

The first equation is easy. In the second, first calculate 10% (1,100) and divide that by 2 (550). Add that to 11,000. In the final equation, calculate 10% again (1,155) and subtract it from 11,550.

Re: Lucy invested $10,000 in a new mutual fund account exactly [#permalink]
03 Sep 2012, 05:51

2

This post received KUDOS

Bunuel wrote:

Lucy invested $10,000 in a new mutual fund account exactly three years ago. The value of the account increased by 10 percent during the first year, increased by 5 percent during the second year, and decreased by 10 percent during the third year. What is the value of the account today?

This is a question of successive % change. This question ultimately reduces to a multiplication problem. Final value after successive % change on $10,000 = $10,000 X 1.1 X 1.05 X .9 1.1 X 1.05 X .9 = 1.0395 Answer is B) _________________

Re: Lucy invested $10,000 in a new mutual fund account exactly [#permalink]
03 Sep 2012, 06:45

I also followed the same approach and got the answer as B. But I am wondering if there is any better method of calculating in any problem with successive year interest rates given. _________________

Re: Lucy invested $10,000 in a new mutual fund account exactly [#permalink]
07 Sep 2012, 02:06

Expert's post

SOLUTION

Lucy invested $10,000 in a new mutual fund account exactly three years ago. The value of the account increased by 10 percent during the first year, increased by 5 percent during the second year, and decreased by 10 percent during the third year. What is the value of the account today?

The value of the account today would be 10,000*1.1*1.05*0.9. Now, the question is how to calculate this efficiently.

10,000*1.1*1.05*0.9=10,000*\frac{11}{10}*\frac{105}{100}*\frac{9}{10}=10,000*\frac{11*105*9}{10,000} --> 10,000 will cancel and we'll get: 11*105*9=(9*11)*105=99*105=(100-1)*105=10,500-105=10,395.

Answer: B.

Kudos points given to everyone with correct solution. Let me know if I missed someone. _________________

Re: Lucy invested $10,000 in a new mutual fund account exactly [#permalink]
19 Oct 2012, 01:06

Stupid lucy! If she sees that there is a crisis in the world and her accounts diminishes every year, why hasn't she redraw her money after the second year?!?... I multiplied the last year with 1.1 instead of 0.9 and i got the D answear... This is lucy's fault! :D

Re: Lucy invested $10,000 in a new mutual fund account exactly [#permalink]
15 Dec 2012, 11:14

Bunuel wrote:

SOLUTION

Lucy invested $10,000 in a new mutual fund account exactly three years ago. The value of the account increased by 10 percent during the first year, increased by 5 percent during the second year, and decreased by 10 percent during the third year. What is the value of the account today?

The value of the account today would be 10,000*1.1*1.05*0.9. Now, the question is how to calculate this efficiently.

10,000*1.1*1.05*0.9=10,000*\frac{11}{10}*\frac{105}{100}*\frac{9}{10}=10,000*\frac{11*105*9}{10,000} --> 10,000 will cancel and we'll get: 11*105*9=(9*11)*105=99*105=(100-1)*105=10,500-105=10,395.

Answer: B.

Thank you for the answer Bunuel, but i was just wondering. When you chose the denominators for the different fractions, was your goal to get 10 000 in the denominator so we could cancel Lucy's initial investment? Smart move by the way

Re: Lucy invested $10,000 in a new mutual fund account exactly [#permalink]
16 Dec 2012, 03:07

1

This post received KUDOS

Ans:: the amount at the end of first year will become the principle for 2nd year, applying this trick and calculating we get the amount at the end of third year to be 10395. So the answer is (B). _________________

Re: Lucy invested $10,000 in a new mutual fund account exactly [#permalink]
02 May 2013, 10:12

.10x10,000= $1,000 end of y1 = 11,000 .05x11,000= $550.00 end of y2 = 11,550 .10x11,550= 1,150 -1,155 (subtract y2 with the loss of y3) end of y3= 10,395

Re: Lucy invested $10,000 in a new mutual fund account exactly [#permalink]
08 Jun 2014, 04:26

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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: Lucy invested $10,000 in a new mutual fund account exactly [#permalink]
10 Sep 2014, 02:43

Bunuel wrote:

Lucy invested $10,000 in a new mutual fund account exactly three years ago. The value of the account increased by 10 percent during the first year, increased by 5 percent during the second year, and decreased by 10 percent during the third year. What is the value of the account today?