Events & Promotions
|
|
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
Track
Your Progress
Practice
Pays
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
Apr 2601:30 AM EDT
-02:30 AM EDT
Learn how Keshav, a Chartered Accountant, scored an impressive 705 on GMAT in just 30 days with GMATWhiz's expert guidance. In this video, he shares preparation tips and strategies that worked for him, including the mock, time management, and more.
Apr 2610:00 AM EDT
-11:00 AM EDT
The Target Test Prep course represents a quantum leap forward in GMAT preparation, a radical reinterpretation of the way that students should study. Try before you buy with a 5-day, full-access trial of the course for FREE!
Apr 2512:30 AM EDT
-01:30 AM EDT
At one point, she believed GMAT wasn’t for her. After scoring 595, self-doubt crept in and she questioned her potential. But instead of quitting, she made the right strategic changes. The result? A remarkable comeback to 695. Check out how Saakshi did it.
Apr 2711:00 AM EDT
-12:00 PM EDT
Prefer video-based learning? The Target Test Prep OnDemand course is a one-of-a-kind video masterclass featuring 400 hours of lecture-style teaching by Scott Woodbury-Stewart, founder of Target Test Prep and one of the most accomplished GMAT instructors
Apr 2808:00 AM PDT
-11:00 AM PDT
Whether you are just beginning your MBA journey or fine-tuning your path to a 700+ score, GMAT Day is designed to give you a competitive edge.
May 0111:00 AM PDT
-12:00 PM PDT
Free- full-length test + 15 concept videos + 150+ short videos + study plan!
Updated on: 08 Oct 2015, 17:38
Originally posted by rayallen34 on 08 Oct 2015, 17:01.
Last edited by ENGRTOMBA2018 on 08 Oct 2015, 17:38, edited 2 times in total.
Last edited by ENGRTOMBA2018 on 08 Oct 2015, 17:38, edited 2 times in total.
Formatted the question, added the OA
Kudos
Bookmarks
B
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
35%
(medium)
Question Stats:
77% (02:13) correct
23%
(02:29)
wrong
based on 122
sessions
History
Date
Time
Result
Not Attempted Yet
At the of his one-year investment, Charles received $54,080, including interest and principal from a certain investment. If the investment paid an annual interest of 8 percent compounded semi-annually, which of the following is the amount of money that Charles originally invested?
A) $45,000
B) $50,000
C) $54,000
D) $59,000
E) $62,000
A) $45,000
B) $50,000
C) $54,000
D) $59,000
E) $62,000
Is there a simpler, quicker, or more efficient way to solve the problem below without having to use the compound interest formula?I'd appreciate it if someone could shed some light on this. The solution I have tells us to plug in values into the compound interest formula, and to solve from there. I'm trying to see if there's another way to solve without having to do that (or a quicker, faster approach).
Thank you!
Thank you!
ENGRTOMBA2018
Joined: 20 Mar 2014
Last visit: 01 Dec 2021
Posts: 2,319
Given Kudos: 816
Concentration: Finance, Strategy
Schools: Kellogg '18 (M)
GMAT 1: 750 Q49 V44
GPA: 3.7
WE:Engineering (Aerospace and Defense)
Products:
08 Oct 2015, 17:38
Kudos
Bookmarks
rayallen34
Follow posting guidelines (link in my signatures) specially:
1. Choose PS or DS forums for posting your questions. Do not post in general math forum
2. Make sure to hide your own analyse under "spoiler" or put it in the next post.
3. Make sure to title your topic correctly.
4. Make sure to put the official answer
As for your question, look below
Compound interest problems can be considered by multiple percentage problems. Lets say, you have 1000$ and the money is compounded annually @10% , how much would you have after 2 years.
You can apply the compound interest formula or you can treat it as 2 percentage calculations as 1.1*1.1 with 2 '1.1's for 2 years.
Thus, you will get 1000*1.1*1.1 after 2 years.
Additionally, remember that real GMAT questions or GMATlike questions from good reliable sources will have solutions that are not time or calculation intensive.
You are given that a certain investment gave you X $ after 1 year. So the original investment must be <X
Thus you can rule out options D-E as these options will make the original amount > the interest+principle amount
Option C is very close to the amount after 1st year and 4% will definitely give you >80$ in interests.
Now you only have 2 options left (A and B)
Per the question, let x be the original amount invested ---> x(1.04)^2 = 54080 . This clearly shows that answer must be B.
Additionally, remember that if you calculate new amount after a% interest on the same principle amount (SIMPLE vs COMPOUND), simple interest will be just less than compound interest.
Thus, for this question, with 50000 @4% semi annual interest, simple interest will give you = (50000*4*2)/100 = 4000 . thus the new amount becomes = 50000+4000 = 54000, just less than the value of 54080, making this the correct answer. (45000 will only give you an amount of 45000+3600 = 48600, much less than 54080).
Some other compound interest problems at the location compound-interest-problems-175272.html?fl=similar
Hope this helps.
08 Oct 2015, 22:02
Kudos
Bookmarks
Hi rayallen34,
You might notice how 'spread out' the answer choices are. Based on that spread, and a bit of logic, you can get to the correct answer with just a little work.
First off, we know that Charles' investment made money, so whatever he initially invested would have to be less than the $54,080 he ended up with. Eliminate Answers D and E.
Since the interest rate was 8%, compounded semi-annually, the interest on a $1,000 investment would be more than $80. Charles clearly invested over $40,000, so the interest would be greater than that. Eliminate Answer C.
From here, you can TEST the remaining 2 answers. While the semi-annual calculation would lead to slightly more than 8% total interest, you can use 8% as an estimate.
So, what is 8% of $45,000? And what is 8% of $50,000? Which one is closer to the $54,080 that Charles ended up with? THAT one is the answer.
Final Answer:
You're likely to see 1 question on Test Day that requires the use of one (or both) of the standard Interest Rate Formulas, so you have to have them memorized and you have to understand the basic concepts behind them. You might not have to do a long-winded calculation to answer that one question though.
GMAT assassins aren't born, they're made,
Rich
You might notice how 'spread out' the answer choices are. Based on that spread, and a bit of logic, you can get to the correct answer with just a little work.
First off, we know that Charles' investment made money, so whatever he initially invested would have to be less than the $54,080 he ended up with. Eliminate Answers D and E.
Since the interest rate was 8%, compounded semi-annually, the interest on a $1,000 investment would be more than $80. Charles clearly invested over $40,000, so the interest would be greater than that. Eliminate Answer C.
From here, you can TEST the remaining 2 answers. While the semi-annual calculation would lead to slightly more than 8% total interest, you can use 8% as an estimate.
So, what is 8% of $45,000? And what is 8% of $50,000? Which one is closer to the $54,080 that Charles ended up with? THAT one is the answer.
Final Answer:
You're likely to see 1 question on Test Day that requires the use of one (or both) of the standard Interest Rate Formulas, so you have to have them memorized and you have to understand the basic concepts behind them. You might not have to do a long-winded calculation to answer that one question though.
GMAT assassins aren't born, they're made,
Rich
