Confusing Arithmetic Problem

[Halimah_O]

Please I need help with this,

If money is invested at r percent interest, compounded annually, the amount of the 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 the investment 18 years later, when Pat is ready for college?

A. $20,000
B. $15,000
C. $12,000
D. $10,000
E. $ 9,000

My answer: A

Please I will also appreciate links to other questions like this that experts have solved in the past. Thanks

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Hi Halimah_O,

This question has some similarities to "symbolism" questions (in which the prompt shows you a "made up" symbol, tells you what it means and asks you to do a simple calculation with it). The easiest way to tackle the question is to simply follow the instructions.

We're told that r = percent interest.

We're also told that an investment with DOUBLE in approximately 70/r years.

We're told to invest $5,000 at 8 percent for 18 years.

Plug in r = 8

70/8 is about 9 years, meaning our investment will DOUBLE in 9 years.

In the first 9 years, $5,000 doubles to $10,0000
In the next 9 years, $10,000 doubles to $20,000

Final Answer: A

GMAT assassins aren't born, they're made,
Rich

[Matt@VeritasPrep]

You could think of it this way:

We're investing at 8% interest, so our money will double in ≈ 70/8, or ≈ 9 years.

Pat's parents invested $5000, so the money will double every ≈ 9 years. That means that in 18 years it should double twice, and they'll have about $20,000. Your answer is dead on!