Jaya invests in a new mutual fund. The fund averages 10% growth annual

Question

Jaya invests in a new mutual fund. The fund averages 10% growth annually for the first three years, but it loses 30% of its value in the fourth year. At the end of four years, the value of the mutual fund is approximately what percent of the amount Jaya originally paid?

A. 93%
B. 90%
C. 88%
D. 85%
E. 80%

A. 93%
B. 90%
C. 88%
D. 85%
E. 80%

sowragu · Answer

Let the initial amount be 100.
Since it grew on constant basis as 10% for three years = 100*1.1^3 = 11*11*1.1 = 132  
It eroded by 30% = 132 * .7 = 92.something approximated to 93%

IMO A

sameerspice · Answer

Since we only need % I am going to ignore the initial amount all together

After 3rd year amount % growth would be 1.1^3 =>1.331*(Orig Amt) or 133.1% growth
At the end of 4th year it drop to 70% in value => 1.331 * 0.7 => 0.9317 of Original value 
Therefore at the end of 4th year value remaining was only 93%, hence A

Icecream87 · Answer

For principal p

\frac{P*(1,1)^3*0,7}{P}

(1,1)^3*0,7 = 0,93

Abhishek009 · Answer

Let the amount invested be 100

Value of the firm after 1st year is 110% of 100 = 110

Value of the firm after 2nd year is 110% of 110 = 121

Value of the firm after 3rd year is 110% of 121 = 131.10

Value of the firm after 4th year is 70% of 131.10 = 93.17

So, The correct answer will be (A) 93%

Nunuboy1994 · Answer

Quite simply, we can set up an algebraic expression- no need to apply any finance formulas

x(1.1)^3(.7) is what of x? Pick a simple integer like 1

$1(1.1)^3 (.7) 
$1.331 (.7)
 .9317 is what of 1? Now, we can quickly derive the answer because we picked a simple integer such as 1.

Hence,

"A"

EMPOWERgmatRichC · Answer

Hi All,

We're told that a mutual fund averages 10% growth annually for the first three years, but it loses 30% of its value in the fourth year. We're asked for the value of the mutual fund, at the end of 4 years, is approximately what percent of the amount originally paid for it. This question can be solved in a couple of different ways, including by TESTing VALUES.

IF... the original purchase price of the fund was $100... 
then the value at the end of the 1st year was $100 + (.1)($100) = $110 
then the value at the end of the 2nd year was $110 + (.1)($110) = $121 
then the value at the end of the 3rd year was $121 + (.1)($121) = $133.10

and the value at the end of the 4th year was approximately $133 - (.3)($133) = $133 - $39.90 = approximately $93

$93 out of the original $100 is 93/100 = 93%

Final Answer:  A

GMAT assassins aren't born, they're made, 
Rich

ScottTargetTestPrep · Answer

After 4 years, the value is:

1.1 x 1.1 x 1.1 x 0.7 = 0.9317, which is about 93%.

Answer: A

Jaya invests in a new mutual fund. The fund averages 10% growth annual

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Problem Solving (PS) Questions

Jaya invests in a new mutual fund. The fund averages 10% growth annual

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards