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# Chaps so here is a simple problem that i faced in my

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Manager
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Chaps so here is a simple problem that i faced in my [#permalink]

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01 Sep 2004, 10:43
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Chaps

so here is a simple problem that i faced in my previous gmat attempt

say principle is 300,000 compound once a year at x% time period = 2 years and interest at end of two years is 24480

wht is x?

a. 3%
b. 4%
c. 5%
d. 6%
e. 7%

my problem here is i took too long to work out the correct answer. is there a quick way that someone know how to do this?

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Joined: 31 Dec 1969

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Location: Russian Federation
GMAT 3: 740 Q40 V50
GMAT 4: 700 Q48 V38
GMAT 5: 710 Q45 V41
GMAT 6: 680 Q47 V36
GMAT 9: 740 Q49 V42
GMAT 11: 500 Q47 V33
GMAT 14: 760 Q49 V44
WE: Supply Chain Management (Energy and Utilities)

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01 Sep 2004, 11:19
Are we going to take the simple interest twice, taking 300,000 as Principal for the 1rst year and (300,000 + 3000x) as the Prinicipal next year ?

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Manager
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01 Sep 2004, 11:23
This is how i would solve this problem.A = p * ( 1 + r/100) ^n

A = 300000+ 24480 = 324480.

324480 / 300000 = ( 1 + x/100) ^2

sqrt(1.0816) = 100 + x /100

At this point i would not calculate the sqaure root of 1.0816.

I will pick the answer choices.

let sqrt(1.0816) = y

x = 100y -100 or

y = ( 100 +x )/100. ( I also know that the last digit of y should end with 4 or 6 because the last digit of sqrt y^2 is ending with 6 )

if x = 3 then y = 1.03 ( no)
if x = 4 then y = 1.04 ( possible), so calculate y^2 and confirm that its equal to 1.0816.

I prefer this method to calculating the sqrt of a decimal number because i dont know how to calculate the sqrt of decimal nos.

Thanks.

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SVP
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01 Sep 2004, 11:28
Calculate the simple interest and the compounded rate would be just less than it. I got 4 percent. Will try to solve it later with different method.

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SVP
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01 Sep 2004, 11:30
Yes after seeing the answer I think this may work. I got SI rate as 4.08 and you say the answer is 4 so I like this emoticon. so much like me.

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Manager
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01 Sep 2004, 11:43
Doesn't anybody get this equation ?

x^2 + 100x - 816 = 0

I can't seem to solve it to arrive at X = 4

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Intern
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01 Sep 2004, 12:06
I know there has been discussion about how plugging in answers isn't the most effective method, but in this particular case I think it is the fastest way to narrow down the answer choices. You know that 5% pf 300,000 is 15,000 and that compounded another year you are going to be over 30,000. Therefore if you move down the answer choices, 4 works. It's hit or miss but in this case, especially in a time crunch, plugging in might be your best option.

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Intern
Joined: 24 Jul 2004
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Compound Interst - Time crunch [#permalink]

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01 Sep 2004, 12:15
abennett wrote:
I know there has been discussion about how plugging in answers isn't the most effective method, but in this particular case I think it is the fastest way to narrow down the answer choices. You know that 5% pf 300,000 is 15,000 and that compounded another year you are going to be over 30,000. Therefore if you move down the answer choices, 4 works. It's hit or miss but in this case, especially in a time crunch, plugging in might be your best option.

I agree, I was just about to reply with that answer. To add to that, once I move to choice B (4%), this is how I proceeded: 4% of 300K is 12K ad those together to give you 24K then I took 4% of 12K whis is 480, add that to 24K and that is the answer we were backsolving for 24480.

Docing it this way will take about one a minute.

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Manager
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01 Sep 2004, 14:11
Don't know my method helps or not, here is my backward method

After I get 1.0816 from 324480/300000, I know (1+interest rate)^2 = 1.0816

Look over the 5 answer choices, they are arranged from the smallest number to the largest one.

I start with 5%, which is the middle one. (1.05)^2 = 1.1025, which is greater than 1.0816; so I go to the next lower number 4%. (1.04)^2 = 1.0816 and I get the right answer.

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Senior Manager
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02 Sep 2004, 00:41
I got a very simple equation so it might help:

24480 = 2*(x/100)*300,000

From here i got 1224/300 = 4 (Approximately)

B. 4%

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Intern
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02 Sep 2004, 08:03
Do not waste so much time.

Calculate just simple (not compounded) interest for C=5%. It is 30 000. The answer must be less then 5%. Check 4%. 24 000 ?close. Check 3% -18 000. B ?must be the answer.

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02 Sep 2004, 08:03
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