GMAT Question of the Day - Daily to your Mailbox; hard ones only

 It is currently 18 Jun 2019, 08:05

### 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

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

# \$2,000 is deposited in a savings account that pays 6% annual interest

 new topic post reply Question banks Downloads My Bookmarks Reviews Important topics
Author Message
TAGS:

### Hide Tags

Math Expert
Joined: 02 Sep 2009
Posts: 55668
\$2,000 is deposited in a savings account that pays 6% annual interest  [#permalink]

### Show Tags

26 Jan 2016, 02:49
00:00

Difficulty:

35% (medium)

Question Stats:

68% (01:13) correct 32% (01:25) wrong based on 150 sessions

### HideShow timer Statistics

\$2,000 is deposited in a savings account that pays 6% annual interest compounded semiannually. To the nearest dollar, how much is in the account at the end of the year?

A. \$2,060
B. \$2,120
C. \$2,122
D. \$2,247
E. \$2,258

_________________
Verbal Forum Moderator
Status: Greatness begins beyond your comfort zone
Joined: 08 Dec 2013
Posts: 2300
Location: India
Concentration: General Management, Strategy
Schools: Kelley '20, ISB '19
GPA: 3.2
WE: Information Technology (Consulting)
Re: \$2,000 is deposited in a savings account that pays 6% annual interest  [#permalink]

### Show Tags

26 Jan 2016, 04:23
1
Principal = 2000 \$
Annual interest rate = 6%
Semiannually means twice a year
Number of compounding periods = 2
So 6% is split into two
3 % halfway through the year
3% at the end of the year

Interest for first half of year= 2000 * (3/100) = 60 \$
Interest for second half of year = 2060 * (3/100) = 61.8 \$
Total interest = 121.8\$
Total amount in account at the end of year = 2121.8 \$

Alternatively , we can use estimation here
To simplify if we assume that compounding was done only once a year , then interest earnerd will be
= 2000 * (6/100)
=120 \$
So , we can immediately eliminate options A and B.
The interest earned in option D and E are approximately around 247 and 258 \$ ,which will approximately be equal to
effective annual interest rate of 12.5 %. Hence , these options can be eliminated as well .
_________________
When everything seems to be going against you, remember that the airplane takes off against the wind, not with it. - Henry Ford
The Moment You Think About Giving Up, Think Of The Reason Why You Held On So Long
+1 Kudos if you find this post helpful
Intern
Joined: 28 Dec 2015
Posts: 22
Schools: Olin '19, Price
Re: \$2,000 is deposited in a savings account that pays 6% annual interest  [#permalink]

### Show Tags

26 Jan 2016, 04:52
this is the case of semi-annual compounding so, multiply time period by 2 and divide rate by 2
So,
new time=2periods and new rate=6/2=3%
Now,
CA=2000(1+3/100)^2=\$2121.80

Hence answer is C
Manager
Joined: 17 Aug 2015
Posts: 99
Re: \$2,000 is deposited in a savings account that pays 6% annual interest  [#permalink]

### Show Tags

28 Aug 2016, 08:46
The question is asking how much worth is 2000 deposited in an account that pays 6% interest compounded semi annually.
Ok so we know that 6% of 2000 = 120 (since 1% is 20).
So if the compounding would have been done annually, then the amount in end is 2120. But because of compounding twice, the amount will be larger than this figure.
The next answer choice that is closest is choice C. D is too far. We can easily pick C
Manager
Joined: 21 Jul 2017
Posts: 190
Location: India
Concentration: Social Entrepreneurship, Leadership
GMAT 1: 660 Q47 V34
GPA: 4
WE: Project Management (Education)
Re: \$2,000 is deposited in a savings account that pays 6% annual interest  [#permalink]

### Show Tags

10 Sep 2018, 12:07
FV = P (1+r/n)^nt

FV = future value of the deposit
P = principal or amount of money deposited
r = annual interest rate (in decimal form)
n = number of times compounded per year
t = time in years.
Re: \$2,000 is deposited in a savings account that pays 6% annual interest   [#permalink] 10 Sep 2018, 12:07
Display posts from previous: Sort by

# \$2,000 is deposited in a savings account that pays 6% annual interest

 new topic post reply Question banks Downloads My Bookmarks Reviews Important topics

 Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne