Pat invested x dollars in a fund that paid 8 percent annual interest,

Question

Pat invested x dollars in a fund that paid 8 percent annual interest, compounded annually. Which of the following represents the value, in dollars, of Pat's investment plus interest at the end of 5 years&

A. 5(0.08x)
B. 5(1.08x)
C. (1+5(0.08))x
D. (1.08)^5 *x
E. (1.08x)^5

A.  5(0.08x)

B.  5(1.08x)

C.  (1+5(0.08))x

D.  (1.08)^5 *x

E.  (1.08x)^5

Abhishek009 · Accepted Answer

Amount = Principal ( 1 + \frac{Rate}{100})^{No \ of \ Years}

Amount = x ( 1 + \frac{8}{100})^5

Amount = x ( 1.08)^5

Hence, correct answer will be (D)  x ( 1.08)^5

OCDianaOC · Answer

Is that the formula for simple interest?

I'm familiar with the compound interest formula, but never use this formula when the answer choices is an integer... usually, I just repeatedly multiply out... this question is an exception...

pushpitkc · Answer

Hi  OCDianaOC

This is the formula for compound interest when done yearly

A = P*(1 + \frac{r}{100})^{n} 
where 
n - number of years
r - rate of interest
A - Amount realized at the end of n years
P - Principal invested initially

Coming back to this problem

Pat invests x(Principal) at 8%(R) for 5(n) years

Therefore, Amount = x* (1 + \frac{8}{100})^5  = x* (1.08)^5  (Option D)

OCDianaOC · Answer

Thank you! In that case, learning the simple interest formula isn't necessary for the GMAT, right? For simple interest questions, there is never the formula in the answer choices, always an integer instead?

Abhishek009 · Answer

Both are necessary, please go through this link to clear the concept https://magoosh.com/gre/2012/compound-i ... n-the-gre/

NandishSS · Answer

HI  Bunuel

Please tag as GMATPrep EP2

Please find the below attachment

Bunuel · Answer

__________________
Done. Thank you.

anushree01 · Answer

I have been using x + y + x.y/100 (successive % change formula) in order to solve compund intrest Questions.
Can this question be dealt in some other way besides using the classic CI formula ?

Also can my formula be applied here ?
TIA

anushree01 · Answer

I have been using x + y + x.y/100 (successive % change formula) in order to solve compund intrest Questions.
Can this question be dealt in some other way besides using the classic CI formula ?

Also can my formula be applied here ?
TIA

Pat invested x dollars in a fund that paid 8 percent annual interest,

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Pat invested x dollars in a fund that paid 8 percent annual interest,

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