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 Your Progress

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

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

It appears that you are browsing the GMAT Club forum unregistered!

Signing up is free, quick, and confidential.
Join other 500,000 members and get the full benefits of GMAT Club

Registration gives you:

Tests

Take 11 tests and quizzes from GMAT Club and leading GMAT prep companies such as Manhattan GMAT,
Knewton, and others. All are free for GMAT Club members.

Applicant Stats

View detailed applicant stats such as GPA, GMAT score, work experience, location, application
status, and more

Books/Downloads

Download thousands of study notes,
question collections, GMAT Club’s
Grammar and Math books.
All are free!

Thank you for using the timer!
We noticed you are actually not timing your practice. Click the START button first next time you use the timer.
There are many benefits to timing your practice, including:

Concentration: Social Entrepreneurship, Social Entrepreneurship

GPA: 3

WE: Consulting (Insurance)

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

Show Tags

04 Nov 2010, 04:53

2

This post received KUDOS

12

This post was BOOKMARKED

00:00

A

B

C

D

E

Difficulty:

25% (medium)

Question Stats:

75% (01:07) correct
25% (01:53) wrong based on 493 sessions

HideShow timer Statistics

If money is invested at r percent interest, compounded annually, the amount of investment will double in approximately 70/r years. If Pat's parents invested $ 5000 in a long term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of investment 18 years later, when Pat is ready for college?

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) $20,000 (B) $1 5,000 (C) $1 2,000 (D) $1 0,000 (E) $ 9,000

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.
_________________

Re: compounded annually .. spending too much time [#permalink]

Show Tags

04 Nov 2010, 09:41

5

This post received KUDOS

Answer: A Karishma has already explained very well and I would like to add some fact here that would be valuable for our daily life problems. This fact of doubling investment (or growth) after every \(\frac{70}{r}\) where \(r\) is the \(%age\) growth or change per unit time, holds true for real life economy calculations. This isn't just true for this particular question but is actually true for our daily life. Check out the following video link (amazing facts) http://www.youtube.com/watch?v=F-QA2rkpBSY Hope it helps
_________________

"I choose to rise after every fall" Target=770 http://challengemba.blogspot.com Kudos??

If money is invested at r percent interest, compounded annually, the amount of investment will double in approximately 70/r years. If Pat's parents invested $ 5000 in a long term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of 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).

WE 1: 7 Yrs in Automobile (Commercial Vehicle industry)

Re: compounded annually .. spending too much time [#permalink]

Show Tags

08 Sep 2012, 23:50

1

This post was BOOKMARKED

go2013gmat wrote:

How do you know to divide by 8 and not .08?

Pay attention to the question stem. The relationship is in %age. So no need to divide it by 100. 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 pays8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?
_________________

Regards SD ----------------------------- Press Kudos if you like my post. Debrief 610-540-580-710(Long Journey): http://gmatclub.com/forum/from-600-540-580-710-finally-achieved-in-4th-attempt-142456.html

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

Show Tags

09 Sep 2012, 05:44

2

This post was BOOKMARKED

Just to brush up a little theory about Simple and Compound Interests calculation.

If P= Principle amount invested r= annual rate of interest ( For 8% annual rate of interest r=8) t= time period in years. Then, \(Simple Interest (SI) = P*r*t\)

For calculation of Compound Interest calculation- if A=accumulated amount (principle + all interest) Then, \(A= P*( 1 +\) \({r/100}\)\()^t\)
_________________

My mantra for cracking GMAT: Everyone has inborn talent, however those who complement it with hard work we call them 'talented'.

+1 Kudos = Thank You Dear Are you saying thank you?

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

Show Tags

07 Feb 2014, 08:03

Hello from the GMAT Club BumpBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
_________________

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

Show Tags

17 Feb 2015, 12:43

Hello from the GMAT Club BumpBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
_________________

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

Show Tags

18 Feb 2015, 02:07

If money is invested at r percent interest, compounded annually, the amount of investment will double in approximately 70/r years. If Pat's parents invested $ 5000 in a long term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of investment 18 years later, when Pat is ready for college?

A. $20000 B. $15000 C. $12000 D. $10000 E. $9000

Amount will get doubled after (70/8) years or 8.75 years Amount after 8.75 years = 2*5000 = 10000 Amount after 17.5 years = 2*10000 = 20000

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

Show Tags

03 Mar 2015, 23:12

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.

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

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

Show Tags

04 Mar 2015, 04:38

SOURH7WK wrote:

go2013gmat wrote:

How do you know to divide by 8 and not .08?

Pay attention to the question stem. The relationship is in %age. So no need to divide it by 100. 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 pays8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?

Also, I guess that even if you did 70 / 0.08 and ended up in 875, this would have alarmed you that it is not possible to wait 875 years for the amount of the investment to doulbe... Even like this, the next thought would be to divide by 8.

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

Show Tags

04 Mar 2015, 17:30

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!

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

Show Tags

23 Nov 2015, 14:00

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.

Thanks in advance for your help.

Maybe because they said approximate and that they gave 70/r to help. Otherwise, goodluck computing a power of 18 without a calculator
_________________

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

Show Tags

14 Jan 2017, 22:13

Hello from the GMAT Club BumpBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
_________________

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

Show Tags

02 Jul 2017, 05:54

Imo A To Rate of interest =8 % The amount invested doubles in 70/r=70/8 = 8.75 years approximately 9 years 5000(1+8/100)^18 now this difficult to calculate we take help from above In 9 years 5000 will become 10000 and in another 9 years it will become 20,000

Thus A is the answer.
_________________

We are more often frightened than hurt; and we suffer more from imagination than from reality

Version 8.1 of the WordPress for Android app is now available, with some great enhancements to publishing: background media uploading. Adding images to a post or page? Now...

“Keep your head down, and work hard. Don’t attract any attention. You should be grateful to be here.” Why do we keep quiet? Being an immigrant is a constant...