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If $600,000 is invested at 12% annual interest compounded monthly, wha

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If $600,000 is invested at 12% annual interest compounded monthly, wha [#permalink]

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New post 01 Jan 2018, 01:36
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A
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C
D
E

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  45% (medium)

Question Stats:

63% (01:14) correct 38% (01:28) wrong based on 32 sessions

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If $600,000 is invested at 12% annual interest compounded monthly, what will be the total value of the investment after one quarter of the year?

A. $672,000.00
B. $624,362.41
C. $618,180.60
D. $618,000.00
E. $606,000.00
[Reveal] Spoiler: OA

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Re: If $600,000 is invested at 12% annual interest compounded monthly, wha [#permalink]

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New post 01 Jan 2018, 02:49
Bunuel wrote:
If $600,000 is invested at 12% annual interest compounded monthly, what will be the total value of the investment after one quarter of the year?

A. $672,000.00
B. $624,362.41
C. $618,180.60
D. $618,000.00
E. $606,000.00


As the calculation looks a bit tricky, we'll estimate first.
This is an Alternative approach.

Let's say we had simple interest. 12% annual interest compounded monthly means 1% per month.
Then the total interest after one quarter (= 3 months) would be 600,000*3% = 18,000
So our answer needs to be a bit more than 618,000.
Most likely this is (C) and if we're short on time we should mark it and move on.

To calculate fully we can write
1st month interest - 600,000 * 1% = 6,000
2nd month interest - 606,000 * 1% = 6,060
3nd month interest - 612,060 * 1% = 6,120.6
Giving 618,180.60
(C) is our answer.
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Re: If $600,000 is invested at 12% annual interest compounded monthly, wha [#permalink]

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New post 01 Jan 2018, 08:10
Bunuel wrote:
If $600,000 is invested at 12% annual interest compounded monthly, what will be the total value of the investment after one quarter of the year?

A. $672,000.00
B. $624,362.41
C. $618,180.60
D. $618,000.00
E. $606,000.00


Effective interest / Month = 1%

Initial Principal = 600000
Amount after 1st Month = \(600000 + 600000*\frac{1}{12}*\frac{12}{100}\) = \(606000\)
Amount after 2nd Month = \(606000 + 606000*\frac{1}{12}*\frac{12}{100}\) = \(612060\)
Amount after 3rd Month = \(612060 + 612060*\frac{1}{12}*\frac{12}{100}\) = \(618180.60\)

Thus, answer will be (C) 618180.60
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Re: If $600,000 is invested at 12% annual interest compounded monthly, wha   [#permalink] 01 Jan 2018, 08:10
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