An investor purchased a share of non-dividend-paying stock

[barlie]

Assuming x days, using CI we know that

v = p (1+r/100)^x - q

solve for r ={xth root of (v +q)/p -1 }*100

and we're given r to be the square root of the above. So x =2.

Why is this incorrect ??

According to the explaination

r ...is not the same as the r in the compound interest formula. In the formula, the r is already expressed as a decimal equivalent of a percent, in the question the interest is r percent

However the question says r percent. The CI formula uses percentage which will be r/100. See wikipedia http://en.wikipedia.org/wiki/Compound_interestfor CI explaination.


Can someone point out whats wrong with this picture ?

[StaceyKoprince]

Hi, please make sure to post the source of your question. I assume it's likely from one of our tests, since this is the MGMAT Practice Tests thread, but you do need to specify for copyright reasons. Thanks!

[barlie]

source : manhattan gmat cat test

[StaceyKoprince]

Note: this question is called Stock Investment, not Remainder After 10.

X does equal 2. That part is right. The shares rose for 2 days. Then, the following day, the shares declined, and only then did the investor sell. So the author sold the shares 2 + 1 = 3 days later.

The "r" thing was just explaining that we have two different equations, the one given in the problem, and the standard compount interest formula, and these both use the variable r to represent something, but they are written in different forms. The equation given in the problem represents the rate as r/100, and the standard CI formula mentioned in the explanation does not show it as r/100 but merely r - that is, the CI formula assumes it has already been put into decimal form.