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

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

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

Hi stonecold,

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

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 -



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.!!

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..
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 " as below -

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 **

P.S=> I am glad somebody noticed the username

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.