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# If John invested \$ 1 at 5 percent interest compounded annually, the to

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Math Expert
Joined: 02 Sep 2009
Posts: 53066
If John invested \$ 1 at 5 percent interest compounded annually, the to  [#permalink]

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27 Dec 2015, 08:42
00:00

Difficulty:

15% (low)

Question Stats:

76% (00:50) correct 24% (01:05) wrong based on 94 sessions

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If John invested \$ 1 at 5 percent interest compounded annually, the total value of the investment, in dollars, at the end of 4 years would be

A. (1.5)^4
B. 4(1.5)
C. (1.05)^4
D. 1 + (0.05)^4
E. 1 + 4(0.05)

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Re: If John invested \$ 1 at 5 percent interest compounded annually, the to  [#permalink]

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29 Dec 2015, 10:31
[quote="Bunuel"]If John invested \$ 1 at 5 percent interest compounded annually, the total value of the investment, in dollars, at the end of 4 years would be

1(1.05)^4

1.05^4

C. (1.05)^4
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Re: If John invested \$ 1 at 5 percent interest compounded annually, the to  [#permalink]

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02 Jan 2016, 17:49
Hi All,

The GMAT will likely test you on at least one of the two standard interest formulas:

Simple Interest = (Principal)(1 + RT)
Compound Interest = (Principal)(1 + R)^T

Where R is the yearly interest rate and T is the number of years.

In this prompt, the answer choices show that we don't actually have to calculate anything - we just need to 'format' the calculation correctly. We're told that the interest is COMPOUNDED ANNUALLY, so we need the Compound Interest Formula, with a Principal of \$1, an R of 5% (which would 'translate' as .05) and a T of 4. We'd have....

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Re: If John invested \$ 1 at 5 percent interest compounded annually, the to  [#permalink]

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28 Mar 2018, 09:37
Bunuel wrote:
If John invested \$ 1 at 5 percent interest compounded annually, the total value of the investment, in dollars, at the end of 4 years would be

A. (1.5)^4
B. 4(1.5)
C. (1.05)^4
D. 1 + (0.05)^4
E. 1 + 4(0.05)

Using the compound interest formula we have:

1(1 + 0.05)^4

(1.05)^4

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Re: If John invested \$ 1 at 5 percent interest compounded annually, the to   [#permalink] 28 Mar 2018, 09:37
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