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by TheAnuja55 » Tue Oct 16, 2012 12:22 am
If money is invested at r percent interest, compounded annually, the amount of investment will double in approximately 70/r years. If Pat's parents invested $ 5000 in a long term bond that pays 8 percent interest, compounded annually, what will be the approximate total amount of investment 18 years later, when Pat is ready for college?

A. $20000
B. $15000
C. $12000
D. $10000
E. $9000
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by anuprajan5 » Tue Oct 16, 2012 12:59 am
P principal will turn to 2P in 70/r years.

In this specific case, 5000 will turn to 10000 in 70/8 (8.75 years)

We are asked to calculate the amount in 18 years.

[spoiler]In the first 8.75 years, 5000 will turn to 10,000.
In the second 8.75 years, 10000 will turn to 20,000. Hence answer A[/spoiler]
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by TheAnuja55 » Tue Oct 16, 2012 1:27 am
anuprajan5 wrote:P principal will turn to 2P in 70/r years.

In this specific case, 5000 will turn to 10000 in 70/8 (8.75 years)

We are asked to calculate the amount in 18 years.

[spoiler]In the first 8.75 years, 5000 will turn to 10,000.
In the second 8.75 years, 10000 will turn to 20,000. Hence answer A[/spoiler]
Great explanation, Thanx. Without anything I was making it complicated. Now I'm feeling like It was an easy question.
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