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Manager  Joined: 02 Dec 2012
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If money is invested at r percent interest, compounded annua  [#permalink]

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Question Stats: 74% (01:55) correct 26% (02:22) wrong based on 2529 sessions

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If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested $5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college? (A)$20000
(B) $15000 (C)$12000
(D) $10000 (E)$9000
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If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested $5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college? (A)$20000
(B) $15000 (C)$12000
(D) $10000 (E)$9000

Since investment doubles in 70/r years, then for r=8 it'll double in 70/8=~9 years (we are not asked about the exact amount so such an approximation will do). Thus in 18 years investment will double twice and become ($5,000*2)*2=$20,000 (after 9 years investment will become $5,000*2=$10,000 and in another 9 years it'll become $10,000*2=$20,000).

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Re: If money is invested at r percent interest, compounded annua  [#permalink]

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I think without the 1st sentence, we still can guess the answer easily.

$5,000 at 8%/year =$400/year --> 10-years interest will be $4,000, 20 years will be$8,000
Since the interest compounded annually in 18 years (very long period), the total value would be >$18,000 --> eliminate B,C,D,E ##### General Discussion Intern  B Joined: 09 Feb 2013 Posts: 21 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 1 It's very important to pay attention to the wordings as first I thought that the compound interest formula needs to be applied. Though I read the question again and got it correct Posted from my mobile device Veritas Prep GMAT Instructor V Joined: 16 Oct 2010 Posts: 10784 Location: Pune, India If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 4 2 If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested$5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?

(A) $20000 (B)$15000
(C) $12000 (D)$10000
(E) $9000 There has to be a logic to why they gave you "If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years." If r = 8%, the principal will double in 70/8 = apprx 9 years. So in 9 years, 5000 will become 10,000. In another 9 years (i.e. 18 years from now) principal will double again and become$20,000.
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Re: If money is invested at r percent interest, compounded annua  [#permalink]

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5000 will multiply approx. 4 times = 5000 * 4 = 20000

Intern  Joined: 29 Oct 2014
Posts: 22
If money is invested at r percent interest, compounded annually,  [#permalink]

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Hey all,

Just wondering what in the question made you realise you should solve this question via 5,000 x 2 x 2 rather than using the actual interest formula? i.e. P(1+r/n)^nt?

I used the formula then realised the calcs were too complicated.

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Re: If money is invested at r percent interest compounded annual  [#permalink]

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Hi ColdSushi,

GMAT Quant questions (and the accompanying answer choices) are always carefully written. Sometimes they offer hints as to how you can use estimation to get to the correct answer.

Here, the word 'approximate' in the prompt is essentially telling you to estimate an answer. With an interest rate of 8% and the given formula, you're meant to estimate that the investment will double in 70/8 = about 9 years. The question then asks for the total investment after 18 years. THAT number (18) is not an accident - it was specifically chosen so that you can take advantage of your estimation.

Start = $5000 After 9 years =$10,000
After 18 years = $20,000 Final Answer: GMAT assassins aren't born, they're made, Rich _________________ Intern  Joined: 29 Oct 2014 Posts: 22 Re: If money is invested at r percent interest compounded annual [#permalink] ### Show Tags EMPOWERgmatRichC wrote: Hi ColdSushi, GMAT Quant questions (and the accompanying answer choices) are always carefully written. Sometimes they offer hints as to how you can use estimation to get to the correct answer. Here, the word 'approximate' in the prompt is essentially telling you to estimate an answer. With an interest rate of 8% and the given formula, you're meant to estimate that the investment will double in 70/8 = about 9 years. The question then asks for the total investment after 18 years. THAT number (18) is not an accident - it was specifically chosen so that you can take advantage of your estimation. Start =$5000
After 9 years = $10,000 After 18 years =$20,000

Rich

Ah - ok thank you Rich. I def need to pay more attention to these hints.

I find myself 60-70% "there" in solving a question i.e. I'd know what the question is asking and the end point (as opposed to 15-20% "there" when I first started studying for the GMAT) but get stuck because I'd miss an important word or picked a harder way to approach a problem. Hopefully things will get better with practice!
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Re: If money is invested at r percent interest compounded annual  [#permalink]

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ColdSushi wrote:
Hey all,

Just wondering what in the question made you realise you should solve this question via 5,000 x 2 x 2 rather than using the actual interest formula? i.e. P(1+r/n)^nt?

I used the formula then realised the calcs were too complicated.

Maybe because they said approximate and that they gave 70/r to help. Otherwise, goodluck computing a power of 18 without a calculator _________________
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Re: If money is invested at r percent interest, compounded annua  [#permalink]

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1
Hi All,

This question has some similarities to "symbolism" questions (in which the prompt shows you a "made up" symbol, tells you what it means and asks you to do a simple calculation with it). The easiest way to tackle the question is to simply follow the instructions.

We're told that r = percent interest.

We're also told that an investment with DOUBLE in approximately 70/r years.

We're told to invest $5,000 at 8 percent for 18 years. Plug in r = 8 70/8 is about 9 years, meaning our investment will DOUBLE in 9 years. In the first 9 years,$5,000 doubles to $10,0000 In the next 9 years,$10,000 doubles to $20,000 Final Answer: GMAT assassins aren't born, they're made, Rich _________________ Target Test Prep Representative G Status: Head GMAT Instructor Affiliations: Target Test Prep Joined: 04 Mar 2011 Posts: 2800 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 1 Walkabout wrote: If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested$5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?

(A) $20000 (B)$15000
(C) $12000 (D)$10000
(E) $9000 Although this question appears as if we may have to do a lot of calculating, we actually do not. Focus on the first sentence of the question stem. We are given that if money is invested at r percent interest, compounded annually, the amount of investment will double in approximately 70/r years. We are then given that Pat’s parents invest$5,000 at 8 percent interest. It follows that the investment will double after 70/8 years, which is roughly 9 years. With an initial investment of $5,000, the investment will double to$10,000 in about 9 years. In another 9 years (a total of 18 years) the investment will double again to about $20,000. Answer A _________________ # Jeffrey Miller | Head of GMAT Instruction | Jeff@TargetTestPrep.com 250 REVIEWS 5-STAR RATED ONLINE GMAT QUANT SELF STUDY COURSE NOW WITH GMAT VERBAL (BETA) See why Target Test Prep is the top rated GMAT quant course on GMAT Club. Read Our Reviews VP  D Joined: 09 Mar 2016 Posts: 1261 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags Bunuel wrote: Walkabout wrote: If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested$5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?

(A) $20000 (B)$15000
(C) $12000 (D)$10000
(E) $9000 Since investment doubles in 70/r years, then for r=8 it'll double in 70/8=~9 years (we are not asked about the exact amount so such an approximation will do). Thus in 18 years investment will double twice and become ($5,000*2)*2=$20,000 (after 9 years investment will become$5,000*2=$10,000 and in another 9 years it'll become$10,000*2=$20,000). Answer: A. Bunuel isnt the question asking to calculate the total sum (invested ammound +interest rate) like this $$x = 5000(1+0.08)^9$$ where doest say that we need to calculate only amount ivested i am kinda condused Math Expert V Joined: 02 Sep 2009 Posts: 65785 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 1 dave13 wrote: Bunuel wrote: Walkabout wrote: If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested$5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?

(A) $20000 (B)$15000
(C) $12000 (D)$10000
(E) $9000 Since investment doubles in 70/r years, then for r=8 it'll double in 70/8=~9 years (we are not asked about the exact amount so such an approximation will do). Thus in 18 years investment will double twice and become ($5,000*2)*2=$20,000 (after 9 years investment will become$5,000*2=$10,000 and in another 9 years it'll become$10,000*2=$20,000). Answer: A. Bunuel isnt the question asking to calculate the total sum (invested ammound +interest rate) like this $$x = 5000(1+0.08)^9$$ where doest say that we need to calculate only amount ivested i am kinda condused The question asks to find the approximate total amount of the investment in 18 years. So, (initial investment) + (interest earned in 18 years). If you use interests formula it's $$5000(1+0.08)^{18} \approx 19,980$$. The question also gives a way to calculate this quicker by saying that "if money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years", which all the solutions above used to get the answer. _________________ Manager  B Joined: 25 Sep 2018 Posts: 65 If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags Walkabout wrote: If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested$5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?

(A) $20000 (B)$15000
(C) $12000 (D)$10000
(E) $9000 Here, Money will be doubled in 70/.08=9 years (apprx.) Initial money was= 5000 Every 9 year money will be doubled. So, after 18 (9*2) years it'll be (5000*2*2)=20000 Answer is A Posted from my mobile device GMAT Club Legend  V Joined: 11 Sep 2015 Posts: 4987 Location: Canada GMAT 1: 770 Q49 V46 Re: If money is invested at r percent interest, compounded annua [#permalink] ### Show Tags 1 Top Contributor 1 Walkabout wrote: If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested$5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?

(A) $20000 (B)$15000
(C) $12000 (D)$10000
(E) $9000 GIVEN: At r percent interest, the amount of the investment will double in approximately 70/r years So, at 8 percent interest, the time for the investment to double = 70/89 So, the investment will double every 9 years We can now create a growth table: Initially, the investment is worth$5,000
After 9 years, the investment is worth $10,000 After 18 years, the investment is worth$20,000

Cheers,
Brent
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Re: If money is invested at r percent interest, compounded annua  [#permalink]

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given 8%
70/8 = approx 9
it said it will be doubled in 9 years
current is 5000 in next 9 years = 10000
again in next 9 years it will be doubled = 20000 Re: If money is invested at r percent interest, compounded annua   [#permalink] 29 Apr 2020, 09:11

# If money is invested at r percent interest, compounded annua  