If money is invested at r percent interest, compounded annua

Question

If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 50/r years. If Luke's parents invested $12,500 in a long term bond that pays 12 percent interest compounded annually, what will be the approximate total amount of the investment 12 years later, when Luke is ready for college?

A) 62,000
B) 85,500
C) 95,500
D) 100,500
E) 100,000

Don't be rude people, leave your kudo's here!

A) 62,000
B) 85,500
C) 95,500
D) 100,500
E) 100,000

MacFauz · Answer

Can you provide the source of the question?.. I believe the answers are clustered together too closely to make viable options for an approximation question.

Bunuel · Answer

Proper version of this question is from from Official Guide: 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). Answer: A. Discussed here: if-money-is-invested-at-r-percent-interest-compounded-annual-104225.html

feellikequitting · Answer

OG guide, please see original question that Banuel listed above.

I simply changed the #'s around, and changed the answer's to fit my revised question.

Laythesmack23

MacFauz · Answer

Understood.. Although the 70/N part should not be changed because then, the interest rate would not be in line with a compound interest... Otherwise the question is fine... I believe the answer choices should be more widely spread apart.. Using the formula for compound interest "C" will actually be closest value to the actual answer...

gauravkaushik8591 · Answer

Answer equals E in 48 years. I thought by 50th year it would reach 100,500. Options should have been separated more widely for clarity.

KarishmaB · Answer

This question is not correct since with compound interest, amount doubles every 70/n years (good to remember this - comes in handy sometimes). This cannot be changed to 50/n. The actual OG question has 70/n - they give it because they don't expect you to know it. There are no problems with the OG question given by Bunuel in the post above. Try that out instead.

gauravkaushik8591 · Answer

Karishma,

I totally understand what you said. Thanks for clarification. But since the question bent the formula to 50/n, I started treating it like an exponential growth and decay question.

KarishmaB · Answer

Yes, but the question still mentions that the interest is 'compounded'. Let that raise a red flag in future!

gauravkaushik8591 · Answer

Will keep that in mind and add it to my error log. Thank you so much. : )

converge · Answer

Dividing 70/8 yields 8.75 years. So, in 8.75 years 5,000 would become 10,000. In another 8.75 years the amount would become 20,000.

Since by now 17.5 is almost equal to 18, the answer is A: 20,000.

TheUltimateWinner · Answer

VeritasKarishma 
Are you saying that the creative question (talking about the original post) is NOT correct?

Also, it shows that this question is  95% difficulty level  question, but the original question (  OG question  ) shows just  35% difficulty level . I did not see any point this question to be  95% difficulty level .
Thanks__

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If money is invested at r percent interest, compounded annua

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If money is invested at r percent interest, compounded annua

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