shahdevine wrote:At the end of each quarter-year the value of the stock of a certain company is x times more expensive. If at the start of first quarter of 1980 the price of the stock was $3 and at the end of the last quarter of 1985 the price of the stock was $9, what is x?
will post oa after some discussion.
We can solve this problem using the compound interest formula.
Total of Principle + Interest = P(1 + r)^t
P = starting principle
r = interest rate per compound period
t = # of compound periods
In this question:
Total of Principle + Interest = 9
P = 3
r = x/100 (we use x/100 to convert from a percent to a fraction)
t = 24 (6 years, compounded quarterly)
So, we get the equation:
9 = 3(1 + x/100)^24
Now, as you may note, there is no way to actually solve this equation in under 2 minutes (unless you can take the 24th root of 3 in your head, which seems unlikely).
So, I come to 1 of 2 conclusions:
1) there's no way this is a real GMAT question, since it is not possible to solve it algebraically without a calculator; or
2) the poster mistyped the question and this should be a simple interest question instead of compound interest, i.e. the stock grows by a fixed value each quarter instead of by a multiplier, in which case heshamelaziry has posted the correct solution.
For everyone reading this thread, but especially the original poster, ALWAYS include the source of your question and the answer choices. At least if we had answer choices we could figure out if the question is posted correctly and discuss strategic approaches, which every hopeful GMAT star needs to master.
