Find all School-related info fast with the new School-Specific MBA Forum

It is currently 30 Sep 2014, 02:01

Close

GMAT Club Daily Prep

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.

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

Simple and Compound Interest

  Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:
Intern
Intern
avatar
Joined: 04 Dec 2009
Posts: 2
Followers: 0

Kudos [?]: 0 [0], given: 1

Simple and Compound Interest [#permalink] New post 17 Feb 2010, 18:24
Can someone help me out with Simple and Compound Interest..

I hv one more query..Do we get questions on Recurring Deposit/Loans etc?
Current Student
avatar
Joined: 20 Jun 2009
Posts: 168
Schools: Yale SOM Class of 2013
Followers: 4

Kudos [?]: 22 [0], given: 0

Re: Simple and Compound Interest [#permalink] New post 18 Feb 2010, 08:09
Is there a specific question that you'd like help with? It may be easier to explain these concepts with a concrete example.

The key feature of compound interest is that interest is added to the principal at regular intervals, with the result that one earns "interest on interest". This is best illustrated using a simple example.

If you deposit $100 into a savings account with a simple annual interest rate of 10%, after one year you will have $100*(1+.1) = $110, after two years you will have $100*(2+.1) = $120, and so on.

If you deposit the same $100 into a savings account with a compound annual interest rate of 10%, a different outcome results:

- After one year, you'll have $100*(1+.1) = $110
- After two years, you'll have $110*(1+.1) = $121
- After three years, you'll have $121*(1+.1) = $133.1, and so on.

Note that you should pay very close attention to the period according to which the interest compounds. For example, if in the example above we knew that the interest compounded semi-annually rather than annually, we'd have to divide the interest rate by the number of periods (in this case two), and compound as usual:

- After the first six months, you'll have $100*(1+.05) = $105
- After the second six months, you'll have $105*(1+.05) = $110.25
- Etc.

Hope this helps.
Re: Simple and Compound Interest   [#permalink] 18 Feb 2010, 08:09
    Similar topics Author Replies Last post
Similar
Topics:
2 Experts publish their posts in the topic Compounded Interest Rate & Simple Rate gmatt14 13 23 Apr 2010, 08:29
Simple and Compound Interest vinubalan 1 17 Feb 2010, 18:24
Compounded Interest vs Simple Interest chicagocubsrule 1 05 Nov 2009, 20:29
compound interest joemama142000 2 18 Mar 2006, 21:13
What is a simple and easier way to compute compound interest Folaa3 0 07 Feb 2005, 16:15
Display posts from previous: Sort by

Simple and Compound Interest

  Question banks Downloads My Bookmarks Reviews Important topics  


GMAT Club MBA Forum Home| About| Privacy Policy| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group and phpBB SEO

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.