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Java invests in a new mutual fund. The fund averages 10%...

by swerve » Tue Feb 06, 2018 6:51 am
Java 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 Java originally paid?

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

The OA is A.

I can take an amount for initial investment, for example 100, then of the first three years I get 100*1.10^3 = 133 approximately.

Then in the fourth year loses 30%, then 133*0.7 = 93 option A.

Experts, it is correct my solution? I'm not completely sure. Thanks.
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by regor60 » Wed Feb 07, 2018 11:18 am
swerve wrote:Java 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 Java originally paid?

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

The OA is A.

I can take an amount for initial investment, for example 100, then of the first three years I get 100*1.10^3 = 133 approximately.

Then in the fourth year loses 30%, then 133*0.7 = 93 option A.

Yes, your approach is correct

Experts, it is correct my solution? I'm not completely sure. Thanks.
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by EconomistGMATTutor » Wed Feb 07, 2018 11:30 am
swerve wrote:Java 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 Java originally paid?

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

The OA is A.

I can take an amount for initial investment, for example 100, then of the first three years I get 100*1.10^3 = 133 approximately.

Then in the fourth year loses 30%, then 133*0.7 = 93 option A.

Experts, it is correct my solution? I'm not completely sure. Thanks.
Hi swerve,

You used the correct approach.
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by Jeff@TargetTestPrep » Thu Feb 08, 2018 4:03 pm
swerve wrote:Java 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 Java originally paid?

A. 93%
B. 90%
C. 88%
D. 85%
E. 80%
We can let the original value of the fund = n.

So after 4 years it's worth:

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

Answer: A

Jeffrey Miller
Head of GMAT Instruction
[email protected]

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