Approximation

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1947: Master | Next Rank: 500 Posts; Posts: 215; Joined: Sat Jun 14, 2008 4:24 pmFollowed by: 1 member; Thanked: 13 times

by 1947 » Wed Jun 13, 2012 10:20 am

An investment compounds annually at an interest rate of 34.1% What is the smallest investment period by which time the investment will more than triple in value?
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Source: Beat The GMAT — Problem Solving | Wed Jun 13, 2012 10:20 am

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Brent@GMATPrepNow: GMAT Instructor; Posts: 16207; Joined: Mon Dec 08, 2008 6:26 pmFollowed by: 1268 members; Location: Vancouver, BC; Thanked: 5254 times; GMAT Score:770

by Brent@GMATPrepNow » Wed Jun 13, 2012 10:57 am

1947 wrote:An investment compounds annually at an interest rate of 34.1% What is the smallest investment period by which time the investment will more than triple in value?
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For this question, I'd use an annual interest rate of 33%. In other words, the investment will increase by 1/3 each year.
Let's say we begin with $100, and see how many years it takes to exceed $300.

Year 0: $100

Year 1: $100 + 1/3 of $100 is about $133

Year 2: $133 + 1/3 of $133 = $133 + about $44 = $177

Year 3: $177 + 1/3 of $177 = $177 + about $58 = $235

Year 4: $235 + 1/3 of $235 = $235 + about $78 = more than $300

So, the answer is B

Cheers,
Brent

Brent Hanneson - Creator of GMATPrepNow.com

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