GRE Mini Exam #12, Q14

GRE Quant Problem Solving
1

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Hi,
I wanted to confirm my understanding of the language that is used in this question. Since the question says “set to grow 4% every month”, we take the rate as 1.04. If it had said “compounded every 4 months at 4%”, we would have taken the rate as 1+(4/300).

Request you to confirm if I am correct.

Thank you!

2

Hello,

The question means compunded itself.

Since we are multiplying ‘x’ by (1.04)^9, it simply means, after every 4 months we multiply the value by an increase of 4%

Even in the formula of compunded interest, the Amount A = P(1+r/100)^n
So in this case, r=4 & n=9 (3 years = 36 months, and 36/4 = 9)

Hope your doubt got cleared.

3

That’d be correct if the annual rate was 4\%, but that’s not the case here. The general compound interest formula (the one you’re likely invoking) assumes that the “r” is your annual interest rate.