Find all School-related info fast with the new School-Specific MBA Forum

 It is currently 28 Aug 2015, 00:03

### GMAT Club Daily Prep

#### Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# a savings account

 Question banks Downloads My Bookmarks Reviews Important topics
Author Message
TAGS:
Senior Manager
Joined: 07 Nov 2009
Posts: 313
Followers: 6

Kudos [?]: 243 [0], given: 20

a savings account [#permalink]  21 Jul 2010, 21:34
00:00

Difficulty:

(N/A)

Question Stats:

0% (00:00) correct 100% (02:52) wrong based on 3 sessions
Donald plans to invest x dollars in a savings account that pays interest at an annual rate of 8% compounded quarterly. Approximately what amount is the minimum that Donald will need to invest to earn over $100 in interest within 6 months?$1500
$1750$2000
$2500$3000

The formula for calculating compound interest is A = P(1 + r/n)nt where the variables represent the following:
A = amount of money accumulated after t years (principal + interest)
P = principal investment
r = interest rate (annual)
n = number of times per year interest is compounded
t = number of years
[Reveal] Spoiler: OA
Manager
Joined: 20 Jul 2010
Posts: 198
Followers: 2

Kudos [?]: 69 [0], given: 7

Re: a savings account [#permalink]  21 Jul 2010, 23:06
IMO D
rohitgoel15 wrote:
Donald plans to invest x dollars in a savings account that pays interest at an annual rate of 8% compounded quarterly. Approximately what amount is the minimum that Donald will need to invest to earn over $100 in interest within 6 months?$1500
$1750$2000
$2500$3000

The formula for calculating compound interest is A = P(1 + r/n)nt where the variables represent the following:
A = amount of money accumulated after t years (principal + interest)
P = principal investment
r = interest rate (annual)
n = number of times per year interest is compounded
t = number of years

Solution:
r = Rate = 8% compounded quarterly.. = 2% per quarter
t = 6 motnhs = 2 quarters
So A = P (1+0.02)^2
=> A = P * 1.0404

Subsitute, P for 1500, 1700, 2000.. The A-P should be greater than 100 (since Interest = Amount - principal).
For 2500, interest is 101...

Hence, D
_________________

Gotta hit the 700 score this time... 3rd time lucky !
Give me some kudos... Like you, even I need them badly

Current Student
Status: Nothing comes easy: neither do I want.
Joined: 12 Oct 2009
Posts: 2798
Location: Malaysia
Concentration: Technology, Entrepreneurship
Schools: ISB '15 (M)
GMAT 1: 670 Q49 V31
GMAT 2: 710 Q50 V35
Followers: 201

Kudos [?]: 1214 [0], given: 235

Re: a savings account [#permalink]  21 Jul 2010, 23:20
A = P(1 + r/n)nt here t =1/2 and n=4
=> A = P(1 + 8 %/4)4*(1/2)
=> A = P(1 + 2%)^2
=> A = P ( 1+ (2%)^2 + 4%) ,(2%)^2 is very small and can be ignored

=> A = P ( 1+4%) => A-P = P*4%
Also A-P = 100 => P = 100/4% = 100*100/4 = 2500
_________________

Fight for your dreams :For all those who fear from Verbal- lets give it a fight

Money Saved is the Money Earned

Jo Bole So Nihaal , Sat Shri Akaal

Support GMAT Club by putting a GMAT Club badge on your blog/Facebook

GMAT Club Premium Membership - big benefits and savings

Gmat test review :
670-to-710-a-long-journey-without-destination-still-happy-141642.html

Re: a savings account   [#permalink] 21 Jul 2010, 23:20
Similar topics Replies Last post
Similar
Topics:
10 Julie put half of her savings in a savings account that pays 4 12 Jul 2014, 06:11
30 For a certain savings account, the table shows the three 24 22 Nov 2012, 21:35
John deposits $5000 in a savings account for 5 years 1 12 Jan 2012, 17:41 7 John deposited$10,000 to open a new savings account that 5 15 Sep 2009, 13:11
20 Donald plans to invest x dollars in a savings account that 15 19 Aug 2009, 05:44
Display posts from previous: Sort by

# a savings account

 Question banks Downloads My Bookmarks Reviews Important topics

 Powered by phpBB © phpBB Group and phpBB SEO Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.