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An investment club has had an average rate of return of 15%

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GMAT Club Legend
GMAT Club Legend
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Joined: 07 Jun 2014
Posts: 4710
GRE 1: Q167 V156
WE: Business Development (Energy and Utilities)
Followers: 91

Kudos [?]: 1613 [0], given: 375

CAT Tests
An investment club has had an average rate of return of 15% [#permalink] New post 26 Apr 2017, 18:13
Expert's post
00:00

Question Stats:

100% (00:35) correct 0% (00:00) wrong based on 5 sessions
An investment club has had an average rate of return of 15% per year for the past 6 years. If Teresa invests $1000 today and neither adds nor subtracts money from the club, how much will Teresa have invested after 5 years assuming that the rate of return does not change?

A. \(1000 + 1.15^5\)
B. \(1000(1.15)^5\)
C. \(1000 + 0.15\)
D. \(1000(0.15)^5\)
E. \(1000(5)^{0.15}\)

Drill 4
Question: 7
Page: 322
[Reveal] Spoiler: OA

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GMAT Club Legend
GMAT Club Legend
User avatar
Joined: 07 Jun 2014
Posts: 4710
GRE 1: Q167 V156
WE: Business Development (Energy and Utilities)
Followers: 91

Kudos [?]: 1613 [0], given: 375

CAT Tests
Re: An investment club has had an average rate of return of 15% [#permalink] New post 04 May 2017, 01:03
Expert's post
Explanation

To solve this question, remember that the formula for finding the result of periodic increases at a certain rate is

\((Original_Amount)(1 + rate)^{number_of_periods}\).

In this case, the final amount would be \(1000(1.15)^5\).

The correct answer is choice (B).

If you forgot the formula, you could calculate the final amount after 5 years, and then calculate all the answers for a match.
_________________

Sandy
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Re: An investment club has had an average rate of return of 15%   [#permalink] 04 May 2017, 01:03
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An investment club has had an average rate of return of 15%

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