It is currently 18 Nov 2017, 18:54

### GMAT Club Daily Prep

#### 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

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

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# The compound interest on a certain sum of money invested at a certain

Author Message
TAGS:

### Hide Tags

Math Expert
Joined: 02 Sep 2009
Posts: 42249

Kudos [?]: 132619 [0], given: 12326

The compound interest on a certain sum of money invested at a certain [#permalink]

### Show Tags

02 Jul 2017, 02:42
Expert's post
3
This post was
BOOKMARKED
00:00

Difficulty:

45% (medium)

Question Stats:

71% (02:06) correct 29% (01:48) wrong based on 52 sessions

### HideShow timer Statistics

The compound interest on a certain sum of money invested at a certain rate of interest in the 2nd year and in the 3rd year was $600 and$720 respectively. What was the rate of interest at which the sum of money was invested?

(A) 12.0%
(B) 12.5%
(C) 15.0%
(D) 20.0%
(E) 25.0%
[Reveal] Spoiler: OA

_________________

Kudos [?]: 132619 [0], given: 12326

BSchool Forum Moderator
Joined: 26 Feb 2016
Posts: 1597

Kudos [?]: 672 [0], given: 17

Location: India
WE: Sales (Retail)
The compound interest on a certain sum of money invested at a certain [#permalink]

### Show Tags

02 Jul 2017, 02:52
1
This post was
BOOKMARKED
Given :
On a given sum of money invested at a certain rate of interest,
Compound interest earned(2nd year) = 600$Compound interest earned(3rd year) = 720$

Since, he has to include the 600$earned during the second year, while doing the calculations of the interest for the 3rd year, the additional compound interest earned = x% of 600. Additional interest which is $$120 =\frac{x}{100}* 600 => x =\frac{120}{6} = 20$$ Rate at which the sum was invested(x) = 20(Option D) _________________ Stay hungry, Stay foolish 2017-2018 MBA Deadlines Class of 2020: Rotman Thread | Schulich Thread Class of 2019: Sauder Thread Kudos [?]: 672 [0], given: 17 Board of Directors Status: QA & VA Forum Moderator Joined: 11 Jun 2011 Posts: 3097 Kudos [?]: 1114 [1], given: 327 Location: India GPA: 3.5 WE: Business Development (Commercial Banking) Re: The compound interest on a certain sum of money invested at a certain [#permalink] ### Show Tags 02 Jul 2017, 03:06 1 This post received KUDOS Bunuel wrote: The compound interest on a certain sum of money invested at a certain rate of interest in the 2nd year and in the 3rd year was$600 and $720 respectively. What was the rate of interest at which the sum of money was invested? (A) 12.0% (B) 12.5% (C) 15.0% (D) 20.0% (E) 25.0% $$ROI$$ = $$\frac{720 - 600}{600}*100$$ So, $$ROI$$ = $$\frac{120}{600}*100$$ Or, $$ROI$$ = $$20$$ % Thus, the answer must be (D) 20 % _________________ Thanks and Regards Abhishek.... PLEASE FOLLOW THE RULES FOR POSTING IN QA AND VA FORUM AND USE SEARCH FUNCTION BEFORE POSTING NEW QUESTIONS How to use Search Function in GMAT Club | Rules for Posting in QA forum | Writing Mathematical Formulas |Rules for Posting in VA forum | Request Expert's Reply ( VA Forum Only ) Kudos [?]: 1114 [1], given: 327 VP Status: Learning Joined: 20 Dec 2015 Posts: 1082 Kudos [?]: 81 [0], given: 540 Location: India Concentration: Operations, Marketing GMAT 1: 670 Q48 V36 GRE 1: 314 Q157 V157 GPA: 3.4 WE: Manufacturing and Production (Manufacturing) Re: The compound interest on a certain sum of money invested at a certain [#permalink] ### Show Tags 02 Jul 2017, 06:02 Abhishek009 wrote: Bunuel wrote: The compound interest on a certain sum of money invested at a certain rate of interest in the 2nd year and in the 3rd year was$600 and \$720 respectively. What was the rate of interest at which the sum of money was invested?

(A) 12.0%
(B) 12.5%
(C) 15.0%
(D) 20.0%
(E) 25.0%

$$ROI$$ = $$\frac{720 - 600}{600}*100$$

So, $$ROI$$ = $$\frac{120}{600}*100$$

Or, $$ROI$$ = $$20$$ %

Thus, the answer must be (D) 20 %

Hi Abhishek009
Please explain the formula in detail.
_________________

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

Kudos [?]: 81 [0], given: 540

Board of Directors
Status: QA & VA Forum Moderator
Joined: 11 Jun 2011
Posts: 3097

Kudos [?]: 1114 [0], given: 327

Location: India
GPA: 3.5
Re: The compound interest on a certain sum of money invested at a certain [#permalink]

### Show Tags

02 Jul 2017, 09:04
arvind910619 wrote:
Hi Abhishek009
Please explain the formula in detail.

Dear arvind910619

There is no formula , its the basic concept of Compound Interest which distinguishes Simple Interest from Compound Interest.

In compound Interest we calculate interest for the Interest amount as well, whereas in Simple Interest we calculate Interest only on the principal amount.

Example -

SI on a sum of 100 for 3 years @ 20% pa will be -

$$SI = \frac{100*3*20}{100} = 60$$

CI on a sum of 100 for 3 years @ 20% pa will be -

Interest for 1st Year is $$\frac{100*1*20}{100}$$ = $$20$$
Interest for 2nd Year is $$20$$ + $$\frac{20*1*20}{100}$$ = $$24$$
Interest for 3rd Year is $$24$$ + $$\frac{24*1*20}{100}$$ = $$28.8$$

Here in this question we are given Amount after 3rd Year, which Includes the Principal amount of 2nd Year which is 600 & Interest for 1 year , ie 120...

Hope this helps..

_________________

Thanks and Regards

Abhishek....

PLEASE FOLLOW THE RULES FOR POSTING IN QA AND VA FORUM AND USE SEARCH FUNCTION BEFORE POSTING NEW QUESTIONS

How to use Search Function in GMAT Club | Rules for Posting in QA forum | Writing Mathematical Formulas |Rules for Posting in VA forum | Request Expert's Reply ( VA Forum Only )

Kudos [?]: 1114 [0], given: 327

Intern
Joined: 21 Sep 2016
Posts: 28

Kudos [?]: 2 [1], given: 261

Re: The compound interest on a certain sum of money invested at a certain [#permalink]

### Show Tags

07 Sep 2017, 04:34
1
KUDOS

Let x be the initial investment and y the interest rate:

$$x(1+y)^2 = 600$$
$$x(1+y)^3 = 720$$

Thus:
$$x(1+y)^2 = 600$$
$$x(1+y)^2 * (1+y) = 720$$

$$600 (1+y) = 720$$

$$y = 0,2$$
-> *100 -> 20%

Kudos [?]: 2 [1], given: 261

Re: The compound interest on a certain sum of money invested at a certain   [#permalink] 07 Sep 2017, 04:34
Display posts from previous: Sort by