PS-OG 12/11 Diagnostic test

Oldest

Best Reply

Author

Message

TAGS:

Director

Joined: 04 Jan 2008

Posts: 923

Followers: 27

Kudos [?]: 93 [0], given: 14

PS-OG 12/11 Diagnostic test [#permalink]

20 Sep 2009, 00:08

00:00

Question Stats:

100% (01:02) correct

0% (00:00) wrong

based on 1 sessions

21. John deposited $10,000 to open a new savings
account that earned 4 percent 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?

(A) $10,100
(B) $10,101
(C) $10,200
(D) $10,201
(E) $10,400

[Reveal] Spoiler:

OA is D

_________________

math-polygons-87336.html
competition-for-the-best-gmat-error-log-template-86232.html

Manager

Joined: 11 Sep 2009

Posts: 129

Followers: 3

Kudos [?]: 91 [0], given: 6

Re: PS-OG 12/11 Diagnostic test [#permalink]

20 Sep 2009, 00:55

The answer is D: $10,201.

The principal is given as $10,000. The savings account is said to give 4% annual interest, compounded quarterly.

The general formula for solving compound interest problems is as follows:

FV = P(1 + i/n)^{nt}

FV - future value
P - principal (invested amount)
i - annual interest
n - number of times each year interest is compounded
t - time, in years

In this case,
n = 4 (quarterly)
t = 0.5 (6 months, equivalent to 0.5 years)

FV = 10000*(1+ 0.04/4)^{4*0.5}
FV = 10201

Manager

Joined: 04 Sep 2009

Posts: 53

WE 1: Real estate investment consulting

Followers: 1

Kudos [?]: 15 [0], given: 7

Re: PS-OG 12/11 Diagnostic test [#permalink]

20 Sep 2009, 11:43

Even if you have no idea about FV formula, the key here is to compound QUARTERLY.

Thus: 4% annual is 1% quarterly
Moreover, compounded means you add new interest on the one already accrued after Q1.

So after Q1 you have $10 000 x 1.01 = $10 100
After Q2 you get $10 100 x 1.01 = $10 201

Re: PS-OG 12/11 Diagnostic test [#permalink] 20 Sep 2009, 11:43

		Similar topics	Author	Replies	Last post
Similar Topics:		Kaplan Diagnostic Test Results	amit_drummer	3	16 May 2005, 21:23
	1	diagnostic test	tt11234	2	13 Jun 2010, 19:37
	1	Diagnostic test	ksp	6	16 Aug 2011, 22:16
		Diagnostic test	ksp	3	16 Aug 2011, 23:22
		Diagnostic Test	Bunuel	21	28 Mar 2012, 05:57

PS-OG 12/11 Diagnostic test

Main navigation

GMAT Resources

Partners

MBA Resources

GMAT ® is a registered trademark of the Graduate Management Admission Council ® (GMAC ®). GMAT Club's website has not been reviewed or endorsed by GMAC.

GMAT Courses

Admissions Consulting

PS-OG 12/11 Diagnostic test

PS-OG 12/11 Diagnostic test

Main navigation

GMAT Resources

Partners

MBA Resources