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Updated on: 06 Feb 2019, 01:04
3
00:00

Difficulty:

25% (medium)

Question Stats:

83% (01:51) correct 17% (02:04) wrong based on 65 sessions

### HideShow timer Statistics

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

Originally posted by yosita18 on 25 Aug 2016, 06:45.
Last edited by Bunuel on 06 Feb 2019, 01:04, edited 3 times in total.
Senior Manager
Joined: 23 Apr 2015
Posts: 302
Location: United States
WE: Engineering (Consulting)
Re: Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid [#permalink] ### Show Tags 25 Aug 2016, 06:52 1 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 $$\frac{1}{2}*4 = 2$$ = $$10^5(1.03)^2 = 1,06,090.$$ so Interest is 1,06,090 - 1,00,000 = 6,090 Board of Directors Status: Stepping into my 10 years long dream Joined: 18 Jul 2015 Posts: 3631 Re: Fiona purchased a 1-year,$1,00,000 certificate of deposit that paid  [#permalink]

### Show Tags

25 Aug 2016, 09:15
1
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

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.
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Re: Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid [#permalink] ### Show Tags 13 Oct 2018, 23:26 1 100000 is the principal 3 % will be the interest rate In 6 months, there will be 2 quarters so no. of cycle will be 2 1st cycle simple interest: 3000 2nd cycle simple interest: 3000 2nd cycle interest on 1st cycle simple interest: 90 adding all three : 6090$
Director
Joined: 27 May 2012
Posts: 681
Re: Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid [#permalink] ### Show Tags 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. _________________ - Stne Math Expert Joined: 02 Sep 2009 Posts: 52906 Re: Fiona purchased a 1-year,$1,00,000 certificate of deposit that paid  [#permalink]

### Show Tags

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

Dear Moderator,
Can OA for this question please be updated, Thank you.

Done.

This is a copy of the following OG question: https://gmatclub.com/forum/leona-bought ... 43742.html
_________________
Re: Fiona purchased a 1-year, $1,00,000 certificate of deposit that paid [#permalink] 06 Feb 2019, 01:04 Display posts from previous: Sort by # Fiona purchased a 1-year,$1,00,000 certificate of deposit that paid

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