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The Power of Estimation for GMAT Quant

There’s an old saying that says, “Almost only counts in horseshoes and hand grenades.”  In grade school and high school, you were probably taught that math had to be precise; maybe you even had that unforgivingly drilled into you.  Well, now you’re preparing for the GMAT, and the rules are different.  On GMAT Math, “almost” can be good enough to count.

It’s a fact that you cannot use a calculator on the GMAT.  Therefore, it’s also a fact that the writers of the GMAT can’t expect you do long calculator-type calculations on the GMAT.  They can’t expect you to multiply & divide ugly four-digit numbers and get an exact answer – but they can, and will, expect you to estimate.


When should I estimate on GMAT math?

The short answer is: whenever you would have to be a Will-Hunting-type savant to figure out the exact result in your head, that’s a clue that you should ditch the exact answer altogether and try estimating.  The GMAT may give you the green light by using the words “the estimated value of” or “approximately.”  Another clue is the spread of the answer choices.  If the answer choices are all very close together, well, then it’s going to take some precision to distinguish among them.  But, if the answer choices are widely spaced, estimating will get you close enough to the right answer.


What the GMAT will and won’t ask

Here is an example of a question that will not appear on the GMAT Math: “Jill invests $10000 in an account that pays an annual rate of 3.96%, compounding semi-annually.  Figure out the exact amount she has after two years.”  True, that might have been a question in high school math, but definitely not on the GMAT. First of all, it’s not Problem Solving or Data Sufficiency, so it’s not the right question type.  Moreover, nobody short of a savant-sadist is going to expect you come up to the exact answer that question without a calculator.  You will absolutely not have to do a problem like that.

Here, though, is a suspiciously similar question, and one that the GMAT could pose:


1. Jill invests $10000 in an account that pays an annual rate of 3.96%, compounding semi-annually.  Approximately how much does she have in her account after two years?

    (A) $10079.44
    (B) $10815.83
    (C) $12652.61
    (D) $14232.14
    (E) $20598.11


Solution: first of all, notice the magic word “approximately” — the test-writer is letting us know estimation is perfectly fine.  Furthermore, the answer choices are nicely spread out, which will facilitate estimating.

OK, get ready for some fast & furious estimation.   The interest rate 3.96% is an ugly number, so I’m going to approximate that as 4%.  It compounds semiannually, so that means that there’s 2% every six months, and that happens four times in two years.  Well, 2% of $10000 is $200.  If you get $200, or a little more, on four occasions, that’s a little more than $800 in interest.  We expect an answer slightly higher than $10800, so of course (B) is just right.

Notice, I estimated so that everything up until the last sum was single-digit math.  Single-digit calculations are a good standard for which to strive when you are practicing estimation.

By the way, if you find the bank that will do answer (E), double your money in only two years, that’s terrific, but it probably is something wildly illegal, a Ponzi scheme or worse!  In the real world, that just doesn’t happen. On word problems, especially in financial situations, you should always have your antenna up for what’s realistic or unrealistic.


Practice Question

2. ACME’s manufacturing costs for sets of horseshoes include a $11,450 initial outlay, and $19.75 per set.  They can sell the sets for $52.50.  If profit is revenue from sales minus manufacturing costs, and the company produces and sells 987 sets of horseshoes, what was their profit?

    (A) $20,874.25
    (B) $30,943.25
    (C) $41,308.50
    (D) $51,817.50
    (E) $53,624.25


Answer and Explanation

The numbers are ugly, and the answer choices are widely spread out.  This problem is absolutely screaming for estimation!

So here’s some more fast and furious estimation.  Initial manufacturing outlay: round that from $11450 to $10000.  Cost per set: round to $20.  Sales revenue per set: $50.  Number produced & sold: 1000. OK, now we’re in business.

Cost equals 10000 + 20*1000 = 10000 + 20000 = $30000.  Sales revenue = 50*1000 = $50000.  Profit = (Sales Revenue) – (Cost) =$50000 – $30000 = $20000.  Answer choice (A) is the only answer even close to that.  Single digit calculations all the way, and it was enough to get the answer!

If you would like to share your thoughts on this or ask a question, please let us know in the Comments section below!  🙂

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