gmat blows wrote:
I know this problem may seem easy to the business savy people...but as an engineer, I dont know any of these formulas...
If $10,000 is invested at x percent simple annual interest for n years, which of the following represents the total amount of interest, in dollars, that will be earned by this investment in the n years?
A) 10,000(x^n)
B) 10,000(x/100)^n
C) 10,000n(x/100)
D) 10,000(1+x/100)^n
E) 10,000n(1+x/100)
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This is a GMATPrep question and I'm surprised that GMAT would just ask such a direct question as asking to regurgitate a formula - is there a trick to this that I did not pick up on?? BTW, I picked D (I swear, I've seen that formula floating around...but apparently I'm wrong)
thanks.
C
The reasoning is from the following:
The formula for simple rate of interest is
F = P(1+rt) where
F = future value
P = present value
r = rate
t = time
We can substitute x for r
n for t
and 10,000 in for P
F = 10,000(1+xn)This formula will tell you the principal (original amount invested) + interest, but we only want interest, so the "1+" portion of the formula in unecessary. -->
F = 10,000(xn)Now, we need to get the x into terms of a percentage, so we divide x by 100 -->
F = 10,000(n * x/100)If we move the n outisde the brackets, we get -->
F = 10,000n(x/100) -->
C