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Jill invests $10000 in an account that pays an annual rate [#permalink]

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24 Jan 2013, 18:09

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70% (02:21) correct
30% (01:42) wrong based on 174 sessions

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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?

On the GMAT, you are not allowed to use a calculator, and yet the test can give you problems like this. It is so important to learn estimation skills that allow you to dispatch questions like this with simple arithmetic. For a full discussion of estimation strategies, as well as an analysis of this question, see: http://magoosh.com/gmat/2012/the-power- ... mat-quant/

Re: Jill invests $10000 in an account that pays an annual rate [#permalink]

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14 Nov 2013, 16:50

mikemcgarry wrote:

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?

On the GMAT, you are not allowed to use a calculator, and yet the test can give you problems like this. It is so important to learn estimation skills that allow you to dispatch questions like this with simple arithmetic. For a full discussion of estimation strategies, as well as an analysis of this question, see: http://magoosh.com/gmat/2012/the-power- ... mat-quant/

Mike

I don't know how I got this wrong.

3.96% = 0.0396

Then 1.0396^4 (4 semesters in 2 years) * 10^4 Then (10*1.0396)^4 So you get (10.396^4) as the answer. So answer should have 6 in last digit but I don't see any answer choice that fits the bill.

Re: Jill invests $10000 in an account that pays an annual rate [#permalink]

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14 Nov 2013, 17:04

Expert's post

jlgdr wrote:

mikemcgarry wrote:

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?

On the GMAT, you are not allowed to use a calculator, and yet the test can give you problems like this. It is so important to learn estimation skills that allow you to dispatch questions like this with simple arithmetic. For a full discussion of estimation strategies, as well as an analysis of this question, see: http://magoosh.com/gmat/2012/the-power- ... mat-quant/

Mike

I don't know how I got this wrong.

3.96% = 0.0396

Then 1.0396^4 (4 semesters in 2 years) * 10^4 Then (10*1.0396)^4 So you get (10.396^4) as the answer. So answer should have 6 in last digit but I don't see any answer choice that fits the bill.

Any ideas? Cheers! J

Dear J, What you thought was a clever approach, but you see, with money, folks always round everything to the nearest penny. That units digit might be in the tenths or hundreds or thousands of cent, so that just gets rounded off and does not appear in the monetary answers. In fact, three places after the decimal is the thousands place for the 6 in 10.396, so when we raise that to the fourth, the final 6 would be in the trillionth place, the 12th place after the decimal point. That's definitely a decimal place you will not see on your bank statement! Does all this make sense? Mike _________________

Re: Jill invests $10000 in an account that pays an annual rate [#permalink]

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27 Dec 2013, 08:11

mikemcgarry wrote:

jlgdr wrote:

mikemcgarry wrote:

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?

On the GMAT, you are not allowed to use a calculator, and yet the test can give you problems like this. It is so important to learn estimation skills that allow you to dispatch questions like this with simple arithmetic. For a full discussion of estimation strategies, as well as an analysis of this question, see: http://magoosh.com/gmat/2012/the-power- ... mat-quant/

Mike

I don't know how I got this wrong.

3.96% = 0.0396

Then 1.0396^4 (4 semesters in 2 years) * 10^4 Then (10*1.0396)^4 So you get (10.396^4) as the answer. So answer should have 6 in last digit but I don't see any answer choice that fits the bill.

Any ideas? Cheers! J

Dear J, What you thought was a clever approach, but you see, with money, folks always round everything to the nearest penny. That units digit might be in the tenths or hundreds or thousands of cent, so that just gets rounded off and does not appear in the monetary answers. In fact, three places after the decimal is the thousands place for the 6 in 10.396, so when we raise that to the fourth, the final 6 would be in the trillionth place, the 12th place after the decimal point. That's definitely a decimal place you will not see on your bank statement! Does all this make sense? Mike

Yeah got it Mike, that was very kind of you to clarify

Thanks

Cheers! J

PS. I guess one can use simple interest to solve cause the answer choices are quite spread between you can easily arrive at something near 8%

Re: Jill invests $10000 in an account that pays an annual rate [#permalink]

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04 May 2015, 02:31

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