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

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

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17 Dec 2012, 06:46
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Difficulty:

35% (medium)

Question Stats:

69% (01:33) correct 31% (01:58) wrong based on 1412 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
[Reveal] Spoiler: OA

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

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17 Dec 2012, 06:48
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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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25 Jun 2014, 23:37
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

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

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24 Aug 2014, 15:25
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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

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

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10 Oct 2014, 20:42
should be so easy for business students...especially finance

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

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22 Oct 2014, 00:35
5000 will multiply approx. 4 times = 5000 * 4 = 20000

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

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25 Dec 2015, 12:07
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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

[Reveal] Spoiler:
A

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

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16 Jun 2016, 06:11
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.

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

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04 Jul 2017, 07:18
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Re: If money is invested at r percent interest, compounded annua   [#permalink] 04 Jul 2017, 07:18
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