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An investor opened a money market account with a single deposit of $60

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Senior Manager
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Joined: 03 Apr 2013
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Location: India
Concentration: Marketing, Finance
GMAT 1: 740 Q50 V41
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Re: An investor opened a money market account with a single deposit of $60  [#permalink]

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New post 22 Apr 2017, 01:45
cccmom wrote:
An investor opened a money market account with a single deposit of $6000 on Dec. 31, 2001. The interest earned on the account was calculated and reinvested quarterly. The compound interest for the first 3 quarters of 2002 was $125, $130, and $145, respectively. If the investor made no deposits or withdrawals during the year, approximately what annual rate of interest must the account earn for the 4th quarter in order for the total interest earned on the account for the year to be 10 percent of the initial deposit?

A. 3.1%
B. 9.3%
C. 10.0%
D. 10.5%
E. 12.5%


I got the answer as 3.1 first. But then realized it has to be multiplied by 4 to adjust for making it annual rate. Bunuel Please suggest some literature to read about the conversions and tough questions based on them.
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Re: An investor opened a money market account with a single deposit of $60  [#permalink]

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New post 15 Sep 2018, 07:59
is this from gmatprep ?

if this is, pls , show the screen ?
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An investor opened a money market account with a single deposit of $60  [#permalink]

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New post 10 Nov 2019, 14:50
Initial Investment = $6,000
Interest Occured in the first 3 Quarters: 125 + 130 + 145 = $400
We want total interest to be 10% of the inital investement ($6,000), or $600
So quarter 4 has to earn 600 - 400 =$200 worth of interest

To find the interest rate, take the Interest earned in Q4 divided by the total amount (Initial Investment + 3 quarters of interest)
200/6400

When we simplify that we get 1/32 BUT WE CAN'T STOP HERE:
That gives us the interest rate per quarter, to find the annual interest rate, you have to multiply that by 4.
You get 1/8 = 12.5%[/m]

Answer E
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An investor opened a money market account with a single deposit of $60   [#permalink] 10 Nov 2019, 14:50

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