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16 Jul 2012, 04:36
1
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14
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Difficulty:

25% (medium)

Question Stats:

70% (02:01) correct 30% (01:18) wrong based on 958 sessions

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John deposited $10,000 to open a new savings account that earned 4 percent annual interest, compounded quarterly. If there were no other transactions in the account, what was the amount of money in John's account 6 months after the account was opened? (A)$10,100
(8) $10,101 (e)$10,200
(D) $10,201 (E)$10,400

Diagnostic Test
Question: 21
Page: 23
Difficulty: 650
[Reveal] Spoiler: OA

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16 Jul 2012, 12:54
D.

SI = (P*R*T) / 100
SI after 1st Quarter: (10,000*4*3/12) /100 = 100
Principal for 2nd Quarter = 10,000+ 101 = 10100
SI after 2nd Quarter: (10,101*4*3/12) /100 = 101
Amount after 2nd Quarter (6 months) = 10100 +101 = 10,201
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Re: John deposited $10,000 to open a new savings account that [#permalink] ### Show Tags 20 Jul 2012, 03:03 3 This post received KUDOS Expert's post 10 This post was BOOKMARKED SOLUTION John deposited$10,000 to open a new savings account that earned 4 percent annual interest, compounded quarterly. If there were no other transactions in the account, what was the amount of money in John's account 6 months after the account was opened?

(A) $10,100 (8)$10,101
(e) $10,200 (D)$10,201
(E) $10,400 Approach #1: 4 percent annual interest compounded quarterly --> 1% in 3 moths. For the first 3 moths interest was 1% of$10,000, so $100; For the next 3 moths interest was 1% of$10,000, plus 1% earned on previous interest of $100, so$100+$1=$101;

Total interest for 6 months was $100+$101=$201, hence balance after 6 months was$10,000+ $201=$10,201.

Approach #2:
If the interest were compounded every 6 moths instead of every 3 months (quarterly) then in 6 months the interest would be 4%/2=2% of $10,000, so$200. Now, since the interest is compounded quarterly then there would be interest earned on interest (very small amount) thus the actual interest should be a little bit more than $200, only answer choice D fits. Answer: D. Hope it's clear. _________________ Math Expert Joined: 02 Sep 2009 Posts: 37577 Followers: 7394 Kudos [?]: 99428 [0], given: 11022 Re: John deposited$10,000 to open a new savings account that [#permalink]

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14 Aug 2013, 02:38
Bumping for review and further discussion.
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19 Oct 2014, 08:48
Hello from the GMAT Club BumpBot!

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18 Jul 2015, 17:15
I am new to the forum, starting on GMAT studying. I saw the solutions, but we are not using the calculator on test day so I do not understand thanks
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Re: John deposited $10,000 to open a new savings account that [#permalink] ### Show Tags 18 Jul 2015, 21:16 Amount in John's A/c after 6 months = ($10,000 * 1%) + [($10,000 * 1%) * 1%] =$10,201. Ans (D).
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13 Mar 2017, 09:04
Hello from the GMAT Club BumpBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

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Re: John deposited $10,000 to open a new savings account that [#permalink] 13 Mar 2017, 09:04 Similar topics Replies Last post Similar Topics: 4 Today Joelle opened an interest-bearing savings account and deposited 6 30 Dec 2014, 07:48 Lori deposits$10,000 in a savings account at 10% annual 1 18 Sep 2013, 18:36
12 Marcus deposited $8,000 to open a new savings account that 8 29 Feb 2012, 18:08 1 John deposits$5000 in a savings account for 5 years 3 12 Jan 2012, 18:41