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Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in

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Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in [#permalink]

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A
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Difficulty:

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Question Stats:

48% (00:56) correct 52% (00:37) wrong based on 103 sessions

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Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual interest rate of 10%. He pays them back 5 years later. How much do they receive?

A. 10,000∗0.1^5
B. 10,000∗0.5
C. 10,000∗1.5
D. 10,000∗1.1^5
E. (10,000∗0.1)^5
[Reveal] Spoiler: OA

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Re: Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in [#permalink]

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Amount = Principal + Interest = 10000 + (10000*5*0.1) = 10000(1 + 0.5) = 10000*1.5

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Re: Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in [#permalink]

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Hi shasadou,

You'll likely see one question on Test Day that requires that you use either the Simple Interest or Compound Interest Formulas (or both). Thus, you need to make sure that you have those formulas memorized.

Here, the prompt tells us to use the Simple Interest Formula:

(Principal)(1 + RT) where R is the interest rate and T is the time (in years).

Given the information in the prompt (Principal of $10,000, interest rate of 10% and time of 5 years), we can plug in those values and answer the question:

($10,000)(1 + [.10][5]) =
($10,000)(1.5)

Final Answer:
[Reveal] Spoiler:
C


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Re: Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in [#permalink]

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New post 21 Mar 2016, 20:49
I see 50% + people got it wrong and I guess the only tricky part in this question is the to remember what is asked for

1> Simple Interest Vs Compound interest (there are answers options with compounded interest)
2> What is asked in question (interest or Total amount)

if you are like me and have used S.I = P x R x T formula in school, then it's highly tempting to choose option (b) 10,000∗0.5 --> which is interest only, while the question is asking for Amount in 5 years. so (c) 10,000∗ 1.5

A. 10,000∗0.1^5 --> using CI and Intrest only
B. 10,000∗0.5 --> using SI and Intrest only
C. 10,000∗1.5 --> using SI and Total Amount
D. 10,000∗1.1^5 --> using CI and Total Amount
E. (10,000∗0.1)^5

Ans : C
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Re: Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in [#permalink]

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New post 13 Apr 2016, 07:55
Vyshak wrote:
Amount = Principal + Interest = 10000 + (10000*5*0.1) = 10000(1 + 0.5) = 10000*1.5


Hey is there any theory related to Simple and compound interest and there differences..
Could Honestly use some..
Thanks
StoneCold
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Re: Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in [#permalink]

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Hi stonecold,

You can refer to the following post from Bunuel: percentages-interest-and-more-208098.html

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Re: Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in [#permalink]

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stonecold wrote:
Vyshak wrote:
Amount = Principal + Interest = 10000 + (10000*5*0.1) = 10000(1 + 0.5) = 10000*1.5


Hey is there any theory related to Simple and compound interest and there differences..
Could Honestly use some..
Thanks
StoneCold


Its simple -

The only difference between Simple and compound interest is " Under simple interest rate of interest , the interest / year will be same for the entire tenure " while " Under Compound Interest Rate system the Interest / year will keep on increasing for the entire tenure "

Illustrating further -

Attachment:
CI VS SI.PNG
CI VS SI.PNG [ 4.68 KiB | Viewed 1219 times ]


Check : The total interest for the entire duration of 5 years is Rs 50 and Interest per month is fixed at Rs 10 Only....


Now with the present problem at hand.!! :-D

Let the principal be $1

So Interest for the $1 for 5 years at 10% Pa is -

\(\frac{1*5*10}{100}\) => 0.50

Now Principal is $1 and Interest is $ 0.50 , so Amount to be rerurned is - $1 + $0.50 => $1.50

So, for $ 10,000 , amount to be returned is 10,000 * 1.50

Answer is (C)
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Re: Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in [#permalink]

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New post 13 Apr 2016, 08:37
Abhishek009 wrote:
stonecold wrote:
Vyshak wrote:
Amount = Principal + Interest = 10000 + (10000*5*0.1) = 10000(1 + 0.5) = 10000*1.5


Hey is there any theory related to Simple and compound interest and there differences..
Could Honestly use some..
Thanks
StoneCold


Its simple -

The only difference between Simple and compound interest is " Under simple interest rate of interest , the interest / year will be same for the entire tenure " while " Under Compound Interest Rate system the Interest / year will keep on increasing for the entire tenure "

Illustrating further -

Attachment:
CI VS SI.PNG


Check : The total interest for the entire duration of 5 years is Rs 50 and Interest per month is fixed at Rs 10 Only....


Now with the present problem at hand.!! :-D

Let the principal be $1

So Interest for the $1 for 5 years at 10% Pa is -

\(\frac{1*5*10}{100}\) => 0.50

Now Principal is $1 and Interest is $ 0.50 , so Amount to be rerurned is - $1 + $0.50 => $1.50

So, for $ 10,000 , amount to be returned is 10,000 * 1.50

Answer is (C)


Great Work..
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Re: Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in [#permalink]

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New post 13 Apr 2016, 09:42
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stonecold wrote:
Great Work..
Thanks a ton to both of you


The thing to remember for CI problems is actually very simple

Just remember , " CI is Interest on Interest " :-D as below -
Attachment:
CI.PNG
CI.PNG [ 6.38 KiB | Viewed 1179 times ]


Hope this helps !!

PS : Good Username - I am was an avid fan of Stunnerman , Stone Cold - Reminds me of my childhood days !!
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Re: Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in [#permalink]

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New post 13 Apr 2016, 10:26
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Abhishek009 wrote:
stonecold wrote:
Great Work..
Thanks a ton to both of you


The thing to remember for CI problems is actually very simple

Just remember , " CI is Interest on Interest " :-D as below -
Attachment:
CI.PNG


Hope this helps !!

PS : Good Username - I am was an avid fan of Stunnerman , Stone Cold - Reminds me of my childhood days !!


As He would say => If you think you will nail the GMAT GIVE ME A HELL YEAH...!! **Opens the Clings the CAAANNN **

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Re: Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in [#permalink]

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Re: Jonathan’s grandparents lend $10,000 to Jonathan at a simple annual in   [#permalink] 22 Oct 2017, 03:56
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