Sometimes the concept being tested on the GMAT is not clear from the first read. A question that might look a little intimidating could be easier than it initially appears! Take, for example, this word problem:
Torres invested $P in a long term investment plan for 24 years at an interest compound annually. But due to some financial issues he had to withdraw money at the end of 6 years.How much more amount could he have gotten after 24 years if he received $3P after 6 years , if it’s known that there were no pre-closing charges or deductions in the plan?
This question is tricky at first since we don’t know the compounding interest rate, and feels like perhaps we would need a compound interest formula to solve, but let’s consider.
It started at P and then compounded 6 times and tripled itself to 3P. So this is more like a Geometric sequence question!
The rule is “P triples every 6 years.”
Year 1 – P
Year 6 – 3P
Year 12 – 9P
Year 18 – 27P
Year 24 – 81P
How much more means we subtract 3P from 81P:
81P-3P = 78P
The answer is (D). What is interesting is that we don’t need to know ANYTHING about interest to get this question correct!
The skill required is simply good scratch-work organization!