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If Pat's parents invested $5,000

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If Pat's parents invested $5,000

by kamalj » Mon Dec 11, 2017 9:18 am
If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested $5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?

(A) $20000
(B) $15000
(C) $12000
(D) $10000
(E) $9000

OAA

Please explain.
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by DavidG@VeritasPrep » Mon Dec 11, 2017 9:43 am
kamalj wrote:If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested $5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?

(A) $20000
(B) $15000
(C) $12000
(D) $10000
(E) $9000

OAA

Please explain.
If the investment doubles every 70/r years, and r = 8, then we know the investment will double every 70/8, or approximately 9 years. In 18 years, the investment will double twice.

After 9 years: 5000*2 = 10,000
After 18 years: 10,000*2 = 20,000

The answer is A
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by DavidG@VeritasPrep » Mon Dec 11, 2017 9:45 am
(And I wrote a post about a similarly themed question here: https://www.veritasprep.com/blog/2016/0 ... -the-gmat/
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by Brent@GMATPrepNow » Mon Dec 11, 2017 10:49 am
kamalj wrote:If money is invested at r percent interest, compounded annually, the amount of the investment will double in approximately 70/r years. If Pat's parents invested $5,000 in a long-term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of the investment 18 years later, when Pat is ready for college?

(A) $20000
(B) $15000
(C) $12000
(D) $10000
(E) $9000
Given: r = percent interest
Given: Investment DOUBLES in approximately 70/r years.
Pat's parents invest $5,000 at 8 percent
70/8 ≈ 9
In other words, the investment will DOUBLE every 9 years.

Value of investment after 0 years: $5,000
Value of investment after 9 years: $5,000 x 2 = $10,000
Value of investment after 18 years: $10,000 x 2 = $20,000

Answer: A

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Brent
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