An investment receives 20% annual interest compounded semi-annually for 2 years. If its final value is $29,200, approximately what was the initial investment?
A $17000
B $18000
C $19000
D $20000
E $21000
A fast way to solve it? Thanks!
Interest problem
This topic has expert replies
-
- Master | Next Rank: 500 Posts
- Posts: 142
- Joined: Sun Jun 12, 2011 7:55 am
- Thanked: 5 times
- Followed by:3 members
-
- Master | Next Rank: 500 Posts
- Posts: 131
- Joined: Wed Nov 14, 2012 2:01 pm
- Thanked: 39 times
- Followed by:2 members
- GMATGuruNY
- GMAT Instructor
- Posts: 15539
- Joined: Tue May 25, 2010 12:04 pm
- Location: New York, NY
- Thanked: 13060 times
- Followed by:1906 members
- GMAT Score:790
20% interest compounded semi-annually means that 10% is earned every 6 months.metallicafan wrote:An investment receives 20% annual interest compounded semi-annually for 2 years. If its final value is $29,200, approximately what was the initial investment?
A $17000
B $18000
C $19000
D $20000
E $21000
A fast way to solve it? Thanks!
We can plug in the answers, which represent the initial investment.
Problems about compound interest tend to involve VERY ROUND numbers.
Thus, we should start with D:
1st 6 months: 20000 + 2000 = 22000.
Next 6 months: 22000 + 2200 = 24200.
Next 6 months: 24200 + 2420 ≈ 26600.
Next 6 months: 26600 + 2660 ≈ 29200.
Success!
The correct answer is D.
Private tutor exclusively for the GMAT and GRE, with over 20 years of experience.
Followed here and elsewhere by over 1900 test-takers.
I have worked with students based in the US, Australia, Taiwan, China, Tajikistan, Kuwait, Saudi Arabia -- a long list of countries.
My students have been admitted to HBS, CBS, Tuck, Yale, Stern, Fuqua -- a long list of top programs.
As a tutor, I don't simply teach you how I would approach problems.
I unlock the best way for YOU to solve problems.
For more information, please email me (Mitch Hunt) at [email protected].
Student Review #1
Student Review #2
Student Review #3
Followed here and elsewhere by over 1900 test-takers.
I have worked with students based in the US, Australia, Taiwan, China, Tajikistan, Kuwait, Saudi Arabia -- a long list of countries.
My students have been admitted to HBS, CBS, Tuck, Yale, Stern, Fuqua -- a long list of top programs.
As a tutor, I don't simply teach you how I would approach problems.
I unlock the best way for YOU to solve problems.
For more information, please email me (Mitch Hunt) at [email protected].
Student Review #1
Student Review #2
Student Review #3
-
- Master | Next Rank: 500 Posts
- Posts: 116
- Joined: Sun May 22, 2011 1:11 am
- Thanked: 7 times
Hi Mitch,
U use nos effectively while solving questions.What is ur approach when u see a quant question?How do u decide which option to be tried 1st/when to use numbers instead of variables given in the question?
I have seen that in inequalities/absolute values questions,inserting numbers can be a recipe for disaster.What's ur take on it?
Thanks,
Shreeraj
U use nos effectively while solving questions.What is ur approach when u see a quant question?How do u decide which option to be tried 1st/when to use numbers instead of variables given in the question?
I have seen that in inequalities/absolute values questions,inserting numbers can be a recipe for disaster.What's ur take on it?
Thanks,
Shreeraj
GMAT/MBA Expert
- Scott@TargetTestPrep
- GMAT Instructor
- Posts: 7245
- Joined: Sat Apr 25, 2015 10:56 am
- Location: Los Angeles, CA
- Thanked: 43 times
- Followed by:29 members
We use the compound interest formula: A = P(1 + r/n)^nt, where A = the final value, P = the initial value, r = the interest rate (decimal), n = the number of compounding periods per year, and t = the number of years. We can create the equation:metallicafan wrote:An investment receives 20% annual interest compounded semi-annually for 2 years. If its final value is $29,200, approximately what was the initial investment?
A $17000
B $18000
C $19000
D $20000
E $21000
A fast way to solve it? Thanks!
29,200 = P(1 + 0.2/2)^[(2)(2)]
29,200 = P(1.1)^4
29,200 = 1.4641P
19,944 ≈ P
Answer: D
Scott Woodbury-Stewart
Founder and CEO
[email protected]
See why Target Test Prep is rated 5 out of 5 stars on BEAT the GMAT. Read our reviews