Events & Promotions
|
|
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
Track
Your Progress
Practice
Pays
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
Nov 2007:30 AM PST
-08:30 AM PST
Learn what truly sets the UC Riverside MBA apart and how it helps in your professional growth
Nov 2211:00 AM IST
-01:00 PM IST
Do RC/MSR passages scare you? e-GMAT is conducting a masterclass to help you learn – Learn effective reading strategies Tackle difficult RC & MSR with confidence Excel in timed test environment- Nov 23
11:00 AM IST
-01:00 PM IST
Attend this free GMAT Algebra Webinar and learn how to master the most challenging Inequalities and Absolute Value problems with ease. 
Nov 2510:00 AM EST
-11:00 AM EST
Prefer video-based learning? The Target Test Prep OnDemand course is a one-of-a-kind video masterclass featuring 400 hours of lecture-style teaching by Scott Woodbury-Stewart, founder of Target Test Prep and one of the most accomplished GMAT instructors.
Updated on: 20 Oct 2016, 21:53
Originally posted by stevetaylor on 20 Oct 2016, 14:05.
Last edited by Bunuel on 20 Oct 2016, 21:53, edited 1 time in total.
Last edited by Bunuel on 20 Oct 2016, 21:53, edited 1 time in total.
Renamed the topic and edited the question.
Kudos
Bookmarks
C
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
15%
(low)
Question Stats:
82% (01:12) correct
18%
(01:18)
wrong
based on 168
sessions
History
Date
Time
Result
Not Attempted Yet
At the beginning of January 2003, Jill invested money in an account that collected interest, compounding monthly. Assume the annual percentage rate of interest remained constant. What is the total amount she has invested after seven years?
(1) her initial investment was $15,000
(2) In April, 2004, she earned $38.93 in interest
(1) her initial investment was $15,000
(2) In April, 2004, she earned $38.93 in interest
I saw this problem on Magoosh and was curious if it is actually solvable:
The answer is (C) and I understand the logic that we are only missing one variable (the interest rate) so we should be able to solve, but I can't quite work it out how it is actually solved; can someone please advise?
Cheers!
The answer is (C) and I understand the logic that we are only missing one variable (the interest rate) so we should be able to solve, but I can't quite work it out how it is actually solved; can someone please advise?
Cheers!
20 Oct 2016, 14:33
Kudos
Bookmarks
stevetaylor
amount at end of period = principle (1+annual rate/ periods of compounding) ^ years * frequency of compounding
15000 (1+r/12)^ 7*12.... insuff
from 2
A (1+r/12)^ 1.25*12 - (A) = 38.93.. INSUFF
BOTH
1500 (1+r/12)^ 1.25*12 - (1500) = 38.93
1500 [ (1+R/12)^15 - 1) ] = 38.93... we can solve for the rate
C all you need is to know if it is solvable or not , no need and you have no time to solve it numerically on GMAT.
20 Oct 2016, 14:38
Kudos
Bookmarks
stevetaylor
Dear Steve,
I'm happy to respond! This is Mike McGarry, the author of this very question.
Part of my respond is that asking how to solve for the numerical answer of a DS is, as I believe you understand, profoundly irrelevant to solving the question. That's the first very important point: for a DS question as such, the actual route to the numerical answer is strictly irrelevant.
Now, putting that aside, suppose this were a PS question and we had to solve, or at least estimate. How would we do that? Well, keep in mind that, even though this is a perfectly valid DS of an appropriate difficulty level, if we transform this into a PS, it becomes much much harder than the GMAT would ask. Let's modify it slightly:
At the beginning of January 2003, Jill invested $15,000 in an account that collected interest, compounding monthly. Assume the annual percentage rate of interest remained constant. In April, 2004, she earned $38.93 in interest. Approximately what is the annual interest rate?
(A) 1.5%
(B) 3.0%
(C) 6%
(D) 7.5%
(E) 12%
Even that is a beast, a very difficult GMAT question.
Here's a blog you may find helpful:
Compound Interest on the GMAT
Let's say that the annual interest rate, expressed as a decimal, is R. Then each month, the amount in the count is increased by the percent represented by R/12. Thus, the multiplier would be (1 + R/12), the multiplier for a R/12 percent increase. Thus, the amount after M months would be
\(A = (15000)*(1 + \frac{R}{12})^M\)
To do an exact calculation with that formula would require a calculator. Here's how we might approach an approximation.
In the very first month, the interest earned is exactly R/12 percent of the starting amount, 15,000. With each successive month, the interest piles up, and the amount is slightly more than R/12 percent of 15,000. I'm going to to some fast and loose approximation.
Jill made $38.93 in her 16th month of earning interest, and this is slightly more than what she earned in her first month. Let's say she earned exactly $36 in her first month. Well, $36 is what percent of 15000? Expressed as a decimal, we can simply divide
\(\frac{36}{15000} = \frac{12}{5000} = \frac{24}{10000} = 0.0024\)
That's the estimate percent in the first month. Multiply that by 12 for the annual percent: round the fraction up to 0.0025, which is easier to multiply by 12. We know 12 x 25 = 300, so for 12 x 0.0025, we get an estimate of 0.03, or 3%. That's a very rough approximation, but since the answer choices were spread out, as they most likely would be in an official question, we can easily select the answer, (B) for the PS question.
Does all this make sense?
Mike
