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14 Sep 2022, 16:44
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LILICHKA
Hi LILICHKA,
When you change the number of calculation periods for interest in a year, the overall interest that is accumulated WILL change (in simple terms, the higher the number of calculation periods, the more interest that will be generated - albeit just a tiny percentage higher; this is one of the reasons why Credit Card companies typically calculated your interest payments on a DAILY basis - when applied to all of the Credit Card customers, it's a great way to make a lot of money in really tiny increments).
If you understand that idea, then you can answer this question with very little 'math.' With a 4% interest rate and 4 calculation periods, you know that each period will be ABOUT 1% of the total - BUT by also knowing that each additional calculation period will increase the total interest a tiny bit, you ALSO know that the overall interest generated will be a little higher than 2% after 2 calculation periods. Since 2% of $10,000 is $200, then the answer to this question would have to include just a little more than $200 in interest.
GMAT assassins aren't born, they're made,
Rich
Contact Rich at: Rich.C@empowergmat.com
15 Jan 2023, 12:04
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I have quite similar strategies as Mr Bunuel does, but with a little more detailed explanation.
Step 1:
4% interest on $10,000 per year (12 months). However, his account will receive profit after 3 months as it is on a compound interest basis. So let's find out the amount of interest after the first 3 months first:
(10000 x 4 x 3)
________________ = 100
(100 x12)
So, after 3 months his capital is 10000 (the original amount) + 100 (the profit) = 10100
Step 2:
In the second 3 months, he will earn a profit on the capital amount and also on the profit earned in the first three months.
So, the profit for the second 3 months is:
(10100 x 4 x 3)
________________ = 101
(100 x12)
In total, he receives a profit of 100+101 = 201
His capital was 10000
Therefore after 6 months, he receives 10000 + 201 = 10201
Answer D
Step 1:
4% interest on $10,000 per year (12 months). However, his account will receive profit after 3 months as it is on a compound interest basis. So let's find out the amount of interest after the first 3 months first:
(10000 x 4 x 3)
________________ = 100
(100 x12)
So, after 3 months his capital is 10000 (the original amount) + 100 (the profit) = 10100
Step 2:
In the second 3 months, he will earn a profit on the capital amount and also on the profit earned in the first three months.
So, the profit for the second 3 months is:
(10100 x 4 x 3)
________________ = 101
(100 x12)
In total, he receives a profit of 100+101 = 201
His capital was 10000
Therefore after 6 months, he receives 10000 + 201 = 10201
Answer D
15 Jan 2023, 12:25
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I have quite similar strategies as Mr Bunuel does, but with a little more detailed explanation.
Step 1:
4% interest on $10,000 per year (12 months). However, his account will receive profit after 3 months as it is on a compound interest basis. So let's find out the amount of interest after the first 3 months first:
(10000 x 4 x 3)
________________ = 100
(100 x12)
So, after 3 months his capital is 10000 (the original amount) + 100 (the profit) = 10100
Step 2:
In the second 3 months, he will earn a profit on the capital amount and also on the profit earned in the first three months.
So, the profit for the second 3 months is:
(10100 x 4 x 3)
________________ = 101
(100 x12)
In total, he receives a profit of 100+101 = 201
His capital was 10000
Therefore after 6 months, he receives 10000 + 201 = 10201
Answer D
Step 1:
4% interest on $10,000 per year (12 months). However, his account will receive profit after 3 months as it is on a compound interest basis. So let's find out the amount of interest after the first 3 months first:
(10000 x 4 x 3)
________________ = 100
(100 x12)
So, after 3 months his capital is 10000 (the original amount) + 100 (the profit) = 10100
Step 2:
In the second 3 months, he will earn a profit on the capital amount and also on the profit earned in the first three months.
So, the profit for the second 3 months is:
(10100 x 4 x 3)
________________ = 101
(100 x12)
In total, he receives a profit of 100+101 = 201
His capital was 10000
Therefore after 6 months, he receives 10000 + 201 = 10201
Answer D
