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Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid
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Updated on: 06 Feb 2019, 01:04
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Difficulty:
25% (medium)
Question Stats:
84% (01:51) correct 16% (02:04) wrong based on 67 sessions
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Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid interest at 12% p.a., interest being compounded quarterly. what is the expected total amount of interest which must be paid on this certificate by the end of 6 months?
Re: Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid
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25 Aug 2016, 06:52
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yosita18 wrote:
Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid interest at 12% p.a., interest being compounded quarterly. what is the expected total amount of interest which must be paid on this certificate by the end of 6 months?
Ans: $6090
There might be many ways of calculating Compound Interest. But, when I use the following formula: A = P (1+R/C)^NC
P = Principal Amount R = Annual Interest Rate (as a Decimal) C = Number of "Compoundings" Per Year N = Number of Years A = Final Amount
Can you please help solve this question using the above formula?
You've already mentioned the formula, just substitute the values. \(A = 1,00,000 ( 1 + \frac{12}{400})^2\) raised to 2 because the question asks for only \(\frac{1}{2}\) year and \(\frac{1}{2}*4 = 2\) = \(10^5(1.03)^2 = 1,06,090.\)
Re: Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid
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25 Aug 2016, 09:15
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2
yosita18 wrote:
Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid interest at 12% p.a., interest being compounded quarterly. what is the expected total amount of interest which must be paid on this certificate by the end of 6 months?
Ans: $6090
There might be many ways of calculating Compound Interest. But, when I use the following formula: A = P (1+R/C)^NC
P = Principal Amount R = Annual Interest Rate (as a Decimal) C = Number of "Compoundings" Per Year N = Number of Years A = Final Amount
Can you please help solve this question using the above formula?
Another way to solve this question without using formula.
Since, interest is compounded quarterly, I can say 3% per quarter.
Now, Principle is 1,00,000 .
Apply 3% interest on it , you will get interest earned = 3000
Now after 1st quarter, New principle will be 103000
Again apply 3% on the new principle, you will get New principle = 106090.
Hence, Interest earned in 6 months = 6090.
_________________
Re: Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid
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06 Feb 2019, 00:56
yosita18 wrote:
Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid interest at 12% p.a., interest being compounded quarterly. what is the expected total amount of interest which must be paid on this certificate by the end of 6 months?
(A) $5940 (B) $5000 (C) $6020 (D) $6090 (E) $5050
There might be many ways of calculating Compound Interest. But, when I use the following formula: A = P (1+R/C)^NC
P = Principal Amount R = Annual Interest Rate (as a Decimal) C = Number of "Compoundings" Per Year N = Number of Years A = Final Amount
Can you please help solve this question using the above formula?
Dear Moderator, Can OA for this question please be updated, Thank you.
_________________
Re: Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid
[#permalink]
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06 Feb 2019, 01:04
stne wrote:
yosita18 wrote:
Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid interest at 12% p.a., interest being compounded quarterly. what is the expected total amount of interest which must be paid on this certificate by the end of 6 months?
(A) $5940 (B) $5000 (C) $6020 (D) $6090 (E) $5050
There might be many ways of calculating Compound Interest. But, when I use the following formula: A = P (1+R/C)^NC
P = Principal Amount R = Annual Interest Rate (as a Decimal) C = Number of "Compoundings" Per Year N = Number of Years A = Final Amount
Can you please help solve this question using the above formula?
Dear Moderator, Can OA for this question please be updated, Thank you.
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84% (01:51) correct 
