Greg needs $10,000 to buy a new car. If he has $6,000 to invest at the rate of 5 percent compounded annually, approximately how long will he have to wait until he saves enough to buy the car?

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5 years

8 years

10 years

Correct

15 years

18 years

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Official Explanation

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Given: Greg needs $10,000 to buy a new car.

Asked: If he has $6,000 to invest at the rate of 5 percent compounded annually, approximately how long will he have to wait until he saves enough to buy the car?

We use the compound interest formula:

A = P(1 + r)^n

, where

A = 10000

P = 6000

r = 0.05

, and

n

is the number of years.…

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What this question tests

What it tests

Your ability to apply GMAT math concepts to solve a multi-step problem quickly and accurately. At the 705-805 level, accuracy and speed both matter.

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Overcomplicating the setup — most GMAT problems reward a direct, organized approach over brute calculation.