It is currently 22 Mar 2018, 18:30

### 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

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

# Gmatprep - ps: interest

Author Message
Joined: 31 Dec 1969
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)

### Show Tags

11 Aug 2008, 16:55
00:00

Difficulty:

(N/A)

Question Stats:

0% (00:00) correct 0% (00:00) wrong based on 0 sessions

### HideShow timer Statistics

All,

I don't understand why this equation isn't a simple interest equation I=PRT, and if it is a compounded interest formula, why is it not I=p(1+r/n)^nt? I searched the board and found one related post but still do not understand, I'd appreciate any help (I have a feeling this is simple and I am missing something obvious here...) Thanks in advance - J
Attachment:

interest.JPG [ 35.2 KiB | Viewed 961 times ]

--== Message from GMAT Club Team ==--

This is not a quality discussion. It has been retired.

If you would like to discuss this question please re-post it in the respective forum. Thank you!

To review the GMAT Club's Forums Posting Guidelines, please follow these links: Quantitative | Verbal Please note - we may remove posts that do not follow our posting guidelines. Thank you.
SVP
Joined: 30 Apr 2008
Posts: 1850
Location: Oklahoma City
Schools: Hard Knocks
Re: Gmatprep - ps: interest [#permalink]

### Show Tags

11 Aug 2008, 17:04
I'm not sure why you're using 1+r/n. That isn't correct.

When you have compounding interest, you know you're going to have exponents. You're close in that forumula you used, but it is simpler than what you have.

V = Value after n years
n = number of years interest earned.
r = rate of interest.

V = p(1+r)^n

\$1,000(1+0.056)^3
\$1,000(1.056)^3

jlola21 wrote:
All,

I don't understand why this equation isn't a simple interest equation I=PRT, and if it is a compounded interest formula, why is it not I=p(1+r/n)^nt? I searched the board and found one related post but still do not understand, I'd appreciate any help (I have a feeling this is simple and I am missing something obvious here...) Thanks in advance - J
Attachment:
interest.JPG

_________________

------------------------------------
J Allen Morris
**I'm pretty sure I'm right, but then again, I'm just a guy with his head up his a\$\$.

GMAT Club Premium Membership - big benefits and savings

Director
Joined: 14 Aug 2007
Posts: 704
Re: Gmatprep - ps: interest [#permalink]

### Show Tags

11 Aug 2008, 18:42
Both the formulae,

jallenmorris wrote:
V = Value after n years
n = number of years interest earned.
r = rate of interest.

V = p(1+r)^n

jlola21 wrote:

I=p(1+r/n)^nt?
P = principal amount (initial investment)
r = annual interest rate (as a decimal)
n = number of times the interest is compounded per year
t = number of years
A = amount after time t

are correct

Refer this for details
http://en.wikipedia.org/wiki/Compound_interest

given that n=1 , both should yeild

\$1,000(1.056)^3
SVP
Joined: 30 Apr 2008
Posts: 1850
Location: Oklahoma City
Schools: Hard Knocks
Re: Gmatprep - ps: interest [#permalink]

### Show Tags

11 Aug 2008, 19:20
I didn't see the t "^nt" in the t part of it. That makes sense in order to find the value when compounded monthly, quarterly, semi-annually, or any other period of time shorter than a year.

alpha_plus_gamma wrote:
Both the formulae,

jallenmorris wrote:
V = Value after n years
n = number of years interest earned.
r = rate of interest.

V = p(1+r)^n

jlola21 wrote:

I=p(1+r/n)^nt?
P = principal amount (initial investment)
r = annual interest rate (as a decimal)
n = number of times the interest is compounded per year
t = number of years
A = amount after time t

are correct

Refer this for details
http://en.wikipedia.org/wiki/Compound_interest

given that n=1 , both should yeild

\$1,000(1.056)^3

--== Message from GMAT Club Team ==--

This is not a quality discussion. It has been retired.

If you would like to discuss this question please re-post it in the respective forum. Thank you!

To review the GMAT Club's Forums Posting Guidelines, please follow these links: Quantitative | Verbal Please note - we may remove posts that do not follow our posting guidelines. Thank you.

_________________

------------------------------------
J Allen Morris
**I'm pretty sure I'm right, but then again, I'm just a guy with his head up his a\$\$.

GMAT Club Premium Membership - big benefits and savings

Re: Gmatprep - ps: interest   [#permalink] 11 Aug 2008, 19:20
Display posts from previous: Sort by