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Compounding interest

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by crackgmat007 » Wed May 06, 2009 9:50 am
$10,000 is deposited in a certain account that pays r percent annual interest compounded annually,
the amount D(t), in dollars, that the deposit will grow to in t years is given by D(t) = 10,000
{1+(r/100)}^t. What amount will the deposit grow to in 3 years?
(1) D(t) = 11,000
(2) r =10

Is statement 1 sufficient? Based on statement 1, we get 11,000 = 10000 {1+(r/100)}^t . We have two unknowns (r & t) here. Hence, insufficient. Am I missing something?

OA – D
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Source: — Data Sufficiency |

by Uri » Wed May 06, 2009 11:34 am
you can substitute t with 1 and get the annual interest rate r. from here, you can calculate the interest for 3 years. hope this helps.
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by crackgmat007 » Wed May 06, 2009 12:32 pm
I initially thought of substituting t with 1. but i did not have any reason why only with 1, why not 2 or 3?
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by Vemuri » Thu May 07, 2009 2:15 am
crackgmat007 wrote:I initially thought of substituting t with 1. but i did not have any reason why only with 1, why not 2 or 3?
What is the source of this question? You are right? Statement 1 just provides D(t)=11,000 but does not tell if it is an amount after 6months, 1 year, 2 years or 3 years. There is no reason for you to believe that this amount is after 1 year & so we cannot be sure that the rate of interest we are calculating is for a certain period.
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by Uri » Thu May 07, 2009 10:53 pm
yeah...sorry. in my hurry i overlooked D(t) and thought it to be D(1).
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