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# John deposited $10,000 to open a new savings account that  Question banks Downloads My Bookmarks Reviews Important topics Author Message TAGS: Manager Joined: 23 Jan 2008 Posts: 108 Followers: 2 Kudos [?]: 36 [0], given: 0 John deposited$10,000 to open a new savings account that [#permalink]  01 Feb 2008, 13:08
John deposited $10,000 to open a new savings account that earned 4% annual interest,compounded quarterly. If there were no other transactions in the account, what was the amount of money in john's account 6 months after the account was opened? 1.$10,000
2. $10,101 3.$10,200
4. $10,201 5.$10,400
CEO
Joined: 21 Jan 2007
Posts: 2760
Location: New York City
Followers: 9

Kudos [?]: 387 [0], given: 4

Re: john [#permalink]  01 Feb 2008, 13:12
blog wrote:
John deposited $10,000 to open a new savings account that earned 4% annual interest,compounded quarterly. If there were no other transactions in the account, what was the amount of money in john's account 6 months after the account was opened? 1.$10,000
2. $10,101 3.$10,200
4. $10,201 5.$10,400

FV = PV ( 1 + i/n)^nt
FV = 10000(1+ .04/4)^2(1)
4
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CEO
Joined: 29 Mar 2007
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Re: john [#permalink]  01 Feb 2008, 13:28
blog wrote:
John deposited $10,000 to open a new savings account that earned 4% annual interest,compounded quarterly. If there were no other transactions in the account, what was the amount of money in john's account 6 months after the account was opened? 1.$10,000
2. $10,101 3.$10,200
4. $10,201 5.$10,400

I=P(1+r/n)^nt --> I=10000(1+.04/4)^4(1/2) ---> 10000(1+.01)^2 -->

1.01*1.01 = 1.021 so 10000*1.02 --> 10201

Please note this is a problem in which you have to pay attention to the answer choices. C and D are very close so you can't really afford to do any aproximation here.
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Joined: 26 Jan 2008
Posts: 267
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Re: john [#permalink]  01 Feb 2008, 13:48
blog wrote:
John deposited $10,000 to open a new savings account that earned 4% annual interest,compounded quarterly. If there were no other transactions in the account, what was the amount of money in john's account 6 months after the account was opened? 1.$10,000
2. $10,101 3.$10,200
4. $10,201 5.$10,400

(D)

original amount, P = 10000
4% annual compound interest = 1% quarterly compound interest
After 1 quarter, P = 10000 + (1% of 10000) = 10100 [This is the new principal.. since interest is compounded quarterly]
After 2 quarters, P = 10100 + (1% of 10100) = 10201
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Re: john   [#permalink] 01 Feb 2008, 13:48
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