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Michelle deposited a certain sum of money in a savings [#permalink]
02 Sep 2012, 19:39

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C

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E

Difficulty:

45% (medium)

Question Stats:

46% (02:37) correct
54% (01:52) wrong based on 138 sessions

Michelle deposited a certain sum of money in a savings account on July 1st, 2007. She earns an 8% interest compounded semiannually. The sum of money in the account on December 31st, 2009 is approximately what percent of the initial deposit?

But, there will be some interest on the interest, so the solution will be slightly higher. The next higher solution is 121% and the one thereafter is 135%, which is way too high, the solution must be 121%.

Re: Michelle deposited a certain sum of money in a savings [#permalink]
03 Sep 2012, 02:09

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pgmat wrote:

Michelle deposited a certain sum of money in a savings account on July 1st, 2007. She earns an 8% interest compounded semiannually. The sum of money in the account on December 31st, 2009 is approximately what percent of the initial deposit?

A. 117% B. 120% C. 121% D. 135% E. 140%

Since Michelle earns 8% interest compounded semiannually, then she earns 4% interest every 6 months.

Now, the simple interest earned in 5 periods (30 months = 5*6 months) would be 4%*5=20%. But, since the interest is compounded every 6 months, then there would be interest earned on interest (very small amount) thus the actual interest earned would be a little bit more than 20%, only answer choice C fits.

Re: Michelle deposited a certain sum of money in a savings [#permalink]
27 Oct 2013, 21:23

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Re: Michelle deposited a certain sum of money in a savings [#permalink]
02 Nov 2013, 02:00

Bunuel wrote:

pgmat wrote:

Michelle deposited a certain sum of money in a savings account on July 1st, 2007. She earns an 8% interest compounded semiannually. The sum of money in the account on December 31st, 2009 is approximately what percent of the initial deposit?

A. 117% B. 120% C. 121% D. 135% E. 140%

Since Michelle earns 8% interest compounded semiannually, then she earns 4% interest every 6 months.

Now, the simple interest earned in 5 periods (30 months = 5*6 months) would be 4%*5=20%. But, since the interest is compounded every 6 months, then there would be interest earned on interest (very small amount) thus the actual interest earned would be a little bit more than 20%, only answer choice C fits.

Re: Michelle deposited a certain sum of money in a savings [#permalink]
02 Nov 2013, 03:42

Expert's post

ronr34 wrote:

Bunuel wrote:

pgmat wrote:

Michelle deposited a certain sum of money in a savings account on July 1st, 2007. She earns an 8% interest compounded semiannually. The sum of money in the account on December 31st, 2009 is approximately what percent of the initial deposit?

A. 117% B. 120% C. 121% D. 135% E. 140%

Since Michelle earns 8% interest compounded semiannually, then she earns 4% interest every 6 months.

Now, the simple interest earned in 5 periods (30 months = 5*6 months) would be 4%*5=20%. But, since the interest is compounded every 6 months, then there would be interest earned on interest (very small amount) thus the actual interest earned would be a little bit more than 20%, only answer choice C fits.