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 Your Progress

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

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

It appears that you are browsing the GMAT Club forum unregistered!

Signing up is free, quick, and confidential.
Join other 500,000 members and get the full benefits of GMAT Club

Registration gives you:

Tests

Take 11 tests and quizzes from GMAT Club and leading GMAT prep companies such as Manhattan GMAT,
Knewton, and others. All are free for GMAT Club members.

Applicant Stats

View detailed applicant stats such as GPA, GMAT score, work experience, location, application
status, and more

Books/Downloads

Download thousands of study notes,
question collections, GMAT Club’s
Grammar and Math books.
All are free!

Thank you for using the timer!
We noticed you are actually not timing your practice. Click the START button first next time you use the timer.
There are many benefits to timing your practice, including:

Marcus deposited $8,000 to open a new savings account that [#permalink]

Show Tags

29 Feb 2012, 18:08

1

This post received KUDOS

3

This post was BOOKMARKED

00:00

A

B

C

D

E

Difficulty:

15% (low)

Question Stats:

76% (02:13) correct
24% (01:33) wrong based on 390 sessions

HideShow timer Statistics

Marcus deposited $8,000 to open a new savings account that earned five percent annual interest, compounded semi-annually. If there were no other transactions in the account, what the amount of money in Marcuss account one year after the account was opened?

This is a much simpler problem. I have never used exponents in calculating interest...

Compounding period is half a year so R = 0.05 * 1/2 = 0.025

8000 * (1+ 0.025) = 8200 = total at 1/2 year

8200 * (1+ 0.025) = 8405 = total at year-end

Shortcut = figure total at year end for annually compounding interest... 8000 * (1 + .05) = 8400. More frequent compounding results in ever-so-slightly increased totals so 8405 fits.

Marcus deposited $8,000 to open a new savings account that earned five percent annual interest, compounded semi-annually. If there were no other transactions in the account, what the amount of money in Marcuss account one year after the account was opened? (A) $8,200 (B) $8,205 (C) $8,400 (D) $8,405 (E) $8,500

There is indeed a formula to calculate final balance for compounded interest (check here: math-number-theory-percents-91708.html) though there are at least two shorter ways to solve this problem.

For the first 6 moths interest was 2.5% of $8,000, so $200; For the next 6 moths interest was 2.5% of $8,000, plus 2.5% earned on previous interest of $200, so $200+$5=$205;

Total interest for one year was $200+$205=$405, hence balance after one year was $8,000+ $405=$8,405.

Answer: D.

Approach #2: If the interest were compounded annually instead of semi-annually then in one year the interest would be 5% of $8,000, so $400. Now, since the interest is compounded semi-annually then there would be interest earned on interest (very small amount) thus the actual interest should be a little bit more than $400, only answer choice D fits.

Marcus deposited $8,000 to open a new savings account that earned five percent annual interest, compounded semi-annually. If there were no other transactions in the account, what the amount of money in Marcuss account one year after the account was opened? (A) $8,200 (B) $8,205 (C) $8,400 (D) $8,405 (E) $8,500

There is indeed a formula to calculate final balance for compounded interest (check here: math-number-theory-percents-91708.html) though there are at least two shorter ways to solve this problem.

For the first 6 moths interest was 2.5% of $8,000, so $200; For the next 6 moths interest was 2.5% of $8,000, plus 2.5% earned on previous interest of $200, so $200+$5=$205;

Total interest for one year was $200+$205=$405, hence balance after one year was $8,000+ $405=$8,405.

Answer: D.

Approach #2: If the interest were compounded annually instead of semi-annually then in one year the interest would be 5% of $8,000, so $400. Now, since the interest is compounded semi-annually then there would be interest earned on interest (very small amount) thus the actual interest should be a little bit more than $400, only answer choice D fits.

Answer: D.

Hope it's clear.

Bunuel,

For all CI problems if the interest is given Annually and asked Quarterly or half yearly CI , then we can just divide the Percent according our need. Tats all?

Re: Marcus deposited $8,000 to open a new savings account that [#permalink]

Show Tags

20 Jul 2014, 21:19

Hello from the GMAT Club BumpBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email. _________________

Re: Marcus deposited $8,000 to open a new savings account that [#permalink]

Show Tags

16 Dec 2015, 07:26

Hello from the GMAT Club BumpBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email. _________________

This is the kickoff for my 2016-2017 application season. After a summer of introspect and debate I have decided to relaunch my b-school application journey. Why would anyone want...

Check out this awesome article about Anderson on Poets Quants, http://poetsandquants.com/2015/01/02/uclas-anderson-school-morphs-into-a-friendly-tech-hub/ . Anderson is a great place! Sorry for the lack of updates recently. I...

Time is a weird concept. It can stretch for seemingly forever (like when you are watching the “Time to destination” clock mid-flight) and it can compress and...