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ps INTEREST ( ddelta course )

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ps INTEREST ( ddelta course ) [#permalink] New post 13 Sep 2005, 14:27
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hello :)

here it is ....

Ricardo deposits $1,000 in a bank account that pays 10%
interest, compounded semiannually. Poonam deposits $1,000 in
a bank account that pays 10% interest, compounded annually.
If no more deposits are made, what is the difference between
the two account balances after 1 year?

A. $2.50
B. $10
C. $5
D. $15
E. $100

plz explains yours works
thanks
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 [#permalink] New post 13 Sep 2005, 14:40
A $ 2.50

For Poonam, interest =
1000 * 10 / 100 (for 10%) * 1 (1 year)
or
$ 100

For Ricardo, Interest:

1000 * (1 + (10/2)/100) ^2 - 1000
(since interest is comounded semi-annually we double number of period (to 2) and half the interest rate (10/2))

= $ 102.5

ans: $102.5 - $100 = $2.50
  [#permalink] 13 Sep 2005, 14:40
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