Lucy invested $10,000 in a new mutual fund account exactly three years

Question

Lucy invested $10,000 in a new mutual fund account exactly three years ago. The value of the account increased by 10 percent during the first year, increased by 5 percent during the second year, and decreased by 10 percent during the third year. What is the value of the account today?

(A) $10,350
(B) $10,395
(C) $10,500
(D) $11,500
(E) $12,705

(A) $10,350
(B) $10,395
(C) $10,500
(D) $11,500
(E) $12,705

Bunuel · Accepted Answer

SOLUTION

Lucy invested $10,000 in a new mutual fund account exactly three years ago. The value of the account increased by 10 percent during the first year, increased by 5 percent during the second year, and decreased by 10 percent during the third year. What is the value of the account today?

(A) $10,350
(B) $10,395
(C) $10,500
(D) $11,500
(E) $12,705

(A) $10,350
(B) $10,395
(C) $10,500
(D) $11,500
(E) $12,705

The value of the account today would be  10,000*1.1*1.05*0.9 . Now, the question is how to calculate this efficiently.

10,000*1.1*1.05*0.9=10,000*\frac{11}{10}*\frac{105}{100}*\frac{9}{10}=10,000*\frac{11*105*9}{10,000}  --> 10,000 will cancel and we'll get:  11*105*9=(9*11)*105=99*105=(100-1)*105=10,500-105=10,395 .

Answer: B.

SOURH7WK · Answer

This is a question of successive % change. This question ultimately reduces to a multiplication problem.
Final value after successive % change on $10,000 = $10,000 X 1.1 X 1.05 X .9
1.1 X 1.05 X .9 = 1.0395
Answer is B)

Zinsch123 · Answer

Value after 1 year: 10,000 * 1.1 = 11,000
Value after 2 years: 11,000 * 1.05 = 11,550
Value today: 11,550 * 0.9 = 10,395

Answer B is correct.

The first equation is easy. In the second, first calculate 10% (1,100) and divide that by 2 (550). Add that to 11,000.
In the final equation, calculate 10% again (1,155) and subtract it from 11,550.

catfreak · Answer

10000 + 1000 = 11000
11000 + 550 = 11550
11550 * 0.9 = 10395
(B)

sstasic · Answer

Stupid lucy! If she sees that there is a crisis in the world and her accounts diminishes every year, why hasn't she redraw her money after the second year?!?... I multiplied the last year with 1.1 instead of 0.9 and i got the D answear... This is lucy's fault! :D

priyamne · Answer

Ans::
 the amount at the end of first year will become the principle for 2nd year, applying this trick and calculating we get the amount at the end of third year to be 10395. So the answer is (B).

unceldolan · Answer

Percent increase over time: 1.1 * 1.05 * 0.9 = 1.0395

1.0395 * 10,000 $ = 10,395 $

B

AnsQ · Answer

I cut corners this way:
10% of 10 000=1000 (move the dot one spot)
next year you have 11 000
5% of 11 000= 550 (move the dot one spot 1100 = 10%, divide by two to get 5% 1100/2=550)
So then you have 11 550, and subtract 10% from this --> 11 550 - 1155. Well it has to be less than 11 000 since more than 1000 is subtracted (eliminating D & E), and it has to end in 5 since you're subtracting a number ending in five (eliminating A & C) that leaves only B.

PareshGmat · Answer

Say initial value = 100 (avoiding 2 extra 00)

1st Yr >> 10% increase = 100 + 10 = 110

2nd Yr >> 5% increase = 110 + 5.5 = 115.5

3rd Yr >> 10% decrease = 115.5 - 11.55 = 103.95

Resultant = 103.95 * 100 = 10395

Answer = B

ScottTargetTestPrep · Answer

To determine the value of the account today we want to set up an expression showing the various percent increases and decreases.

Remember we are multiplying each percent increase or decrease against the original value of $10,000.

Also, we must remember that a 10% increase is the same as multiplying by 1.1, a 5% increase is the same as multiplying by 1.05, and a 10% decrease is the same as multiplying by 0.9. That is:

10,000(1.1)(1.05)(0.9)

Because the multiplication may get a bit complicated in the equation above, we should convert each decimal to a fraction, allowing us to reduce before multiplying.
Thus, we have:

10,000(11/10)(105/100)(9/10)

This is equivalent to: 10,000(11 x 105 x 9/10,000)

Thus we see the the two values of 10,000 cancel out, and we are left with:

11 x 105 x 9 = 99 x 105 = 10,395

Note: If you did not want to perform the multiplication of the final step, you could have used a combination of units digits and estimation to come to the correct answer. Keep in mind that the product of 99 and 105 will have a units digit of 5. That leaves us with only B ($10,395) and E ($12,705) as possible answer choices. Next, by rounding up 99 to 100 and multiplying 100 by 105 we get a product of 10,500. Because we rounded up and answer choice E is LARGER than 10,500, it’s not a possible answer choice. Thus, the correct answer is B, $10,395.

BrentGMATPrepNow · Answer

Start: $10,000

First year +10%  
10% of $10,000 = $1000 
So, we get $10,000 + $1000 =  $11,000

Second year +5%  
5% of  $11,000  = $550 
So, we get  $11,000  + $550 =  $11,550

Third year -10%  
10% of  $11,550  = $1,155 
So, we get  $11,550  - $1155 = $10,395

Answer: B

EMPOWERgmatRichC · Answer

Hi All,

Many GMAT Quant questions require 3-5 'steps' to get to the solution, so you shouldn't try to do all of the steps at once. Thankfully, the steps tend to be pretty easy to do, so you shouldn't rush through any of them and you should be sure to write everything on your pad (so that you can physically see the work).

Here, we're starting with $10,000. In the first year, the value increased by 10%....

Let's deal with THAT step right now:

10% of $10,000 = $1,000 
New Total = $10,000 + $1,000 = $11,000

...increased by 5% during the second year....

Now we have $11,000, so the numbers will be a little different:

10% of $11,000 = $1,100 
5% of $11,000 = $550 
New Total = $11,000 + $550 = $11,550

...DECREASED by 10% during the third year...

10% of $11,550 = $1,155 
New Total = $11,550 - $1,155 = $10,395

There's actually a great shortcut in this last calculation. If you look at the 'units digits' of the two numbers, you can deduce that when you subtract one from the other, you end up with a number that ends in 5... Take a good look at the answer choices; how many are LESS than $11,550 AND end in a 5?

Final Answer:  B

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

GeetAwana · Answer

money invested = $10,000

1st year = $10,000 + 10%*$10,000 = $11,000
2nd year = $11,000 + 5%*$11,000 = $11,550
3rd year = $11,550 - 10%*$11,550 = $10,395

therefore value in the account today = $10,395

ArnauG · Answer

To calculate the value of the account today, we'll apply the percentage changes to the initial investment year by year.

Year 1:
The value of the account increased by 10 percent, so the new value after the first year is:
$10,000 + (10/100) * $10,000 = $10,000 + $1,000 = $11,000

Year 2:
The value of the account increased by 5 percent, so the new value after the second year is:
$11,000 + (5/100) * $11,000 = $11,000 + $550 = $11,550

Year 3:
The value of the account decreased by 10 percent, so the new value after the third year is:
$11,550 - (10/100) * $11,550 = $11,550 - $1,155 = $10,395

Therefore, the value of the account today is $10,395, which corresponds to option (B) in the given choices.

Saakshi003 · Answer

can anyone tell me how this question is calculated as compound interest? I calculated it as simple interest as i though nothing is specifically mentioned and got my answer as 10,500.( Maths is not my strong point)

Bunuel · Answer

We’re told the investment was made in an account, and each percentage change is applied to the account's value at a specific time. This means the percentage is applied to the updated value at the end of each year, not the initial $10,000. That’s how it’s inferred to be compound interest. With simple interest, the percentage would only apply to the original $10,000 each year. Since the percentage changes are applied to the updated value yearly, this follows the rules of compound interest.

totaltestprepNick · Answer

B https://www.youtube.com/watch?v=b9VfMrEebLI Nick Slavkovich, GMAT/GRE tutor with 20+ years of experience tutoring@totaltestprep.net

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