At the beginning of January 2003, Elizabeth invested money in an accou

Question

At the beginning of January 2003, Elizabeth invested money in an account that collected interest, compounding more frequently than a year. Assume the annual percentage rate of interest remained constant. What is the total amount she has invested after seven years?

(1) her initial investment was $20,000
(2) the account accrued 7% annual interest

Kudos for a correct solution.

(1) her initial investment was $20,000
(2) the account accrued 7% annual interest

iamdp · Answer

Hi

The answer is E as we don't know the time period of the compounding whether 3 months or 6 month and so

mehrdadtaheri92 · Answer

ANSWER IS E....

in the compounding interests rates problems we need to know all initial amount of money , time period , and the rate of interest to calculate the final amount of money

but here in the 2 data we don't know the TIME PERIOD in which the rate of interest compounds , for example , we don't know the rate compounding semi- annually or quaterlly , etc..

so answer is E...

mvictor · Answer

my choice - E
statement 1 tells us her initial investment, nevertheless we do not know anything about the interest rate and the compounding period.
statement 2 tells us what was the interest rate, however we again do not have all information that is needed.

statement 1+2: we know the initial amount, we know the APR, but we do not know the compounding period. 
the amount earned on 7% interest, compounded semi-annually is different than the amount earned on 7% interest, compounded quarterly or monthly.

hence the only answer left is E.

peachfuzz · Answer

Statement 1: Dont know the compounding frequency or interest rate
Insufficient

Statement 2: Dont know the principal or compounding frequency
Insufficient

Combined, we still dont know the compounding frequency

Answer: E

lipsi18 · Answer

Compound interest = P *(1+ r/n)^nt; P=initial money invested, r=rate of interest, n= #of times/year interest is compounded, t = time.
1. P is given , no information about r & n; therefore Not Sufficient 
2. r is given , no information about P & n; therefore Not Sufficient 
C: 1+2 P & r are given no information about n; therefore not sufficient.
Therefore answer is E

Thanks 
Lipsi

23a2012 · Answer

the answer is E

we do not know the compounding period where all we know is that it is less than a year

aniteshgmat1101 · Answer

+1 for E.
Since the frequency of the time period is not given. Its not possible to find the end amount even if with the information given in the statements, separate or combined.

Bunuel · Answer

MAGOOSH OFFICIAL SOLUTION:

In order to determine the total amount at the end of an investment, we would need to know three things: (a) the initial deposit; (b) the annual percentage rate; and (c) the compounding period.

Statement #1 tells us the initial deposit but not the annual percentage rate. Insufficient.

Statement #2 tells us the annual percentage rate but not the initial deposit. Insufficient.

Together, we know both the initial deposit and the annual percentage rate, but we still don’t know the compounding period. All we know is that it’s less than a year, but quarterly compounding vs. monthly compounding vs. daily compounding would produce different total amounts at the end. Without knowing the exact compounding period, we cannot calculate a precise answer. Even together, the statements are insufficient.

Answer = (E)

Bunuel · Answer

Check other  Compound Interest Problems  in our  Special Questions Directory .

rahultherockpandey · Answer

Statement 01: It only tells us about the initial investment but information about rate of interest or how the rate was compounded. 
Statement 02: Only tells us the rate of interest annually, no information about initial principal.
Combining A and B we get the initial principal and the rate of interest but no info about how the rate was calculated.
Maybe a 3 month period or a 4 month period or half yearly .
So E

SherLocked2018 · Answer

E for me too. 
To calculate 'Value' in this Qn, we need to know : 
1- rate compounded Quarterly or semi annually or monthly or what? 
2- Principle invested
3- rate invested at

Stat1: Gives 2, but no info on 1 and 3. NS 
Stat2: Gives 3, but no info about 1 or 2. NS

Together : we dont have info about 1. Thus NS. E.

mbadude2017 · Answer

I got this correct, but for another reason. Yes you have to know how often the money invested compounds, but I have an issue with the question wording. When you say, "  What is the total amount she has  invested  after seven years  ", you are simply asking "How much money has she deposited in the account over the course of the seven years?" You know she deposited $20,000 initially, but did she ever deposit more than that? You need to know yes or no, and if yes, what the deposit amounts were and at what time the money was deposited into the account so that you could compute the end balance of the account after 7 years.

If the question had been, "What is the total amount of money that had    vested    after seven years", then the question would be valid because it would simply be asking "How much total money would be in the account after 7 years?" Ie, "What is the balance after 7 years?"

Does anyone else agree that there is an issue with the wording?

krish76 · Answer

I just provides principle. No good.
II just provides rate. No good.
I+II provides what you need to calculate the amount if not for the part where it says "compounds more frequently than a year".
r becomes r/frequency (unknown).

Answer E

hari0616 · Answer

The questions asks " What is the total amount she has invested after seven years?". According to the question, she invested just once at the beginning of 2003. There were no investments after that.

Statement A says what her initial investment was $20k. In my opinion that is the answer.  Bunuel  pls correct me.

siddhantvarma · Answer

I agree.  Bunuel , the solution doesn't reflect this; the question should either be updated or the solution should be changed accordingly.

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