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Jolene entered an 18-month investment contract that

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Re: Jolene entered an 18-month investment contract that  [#permalink]

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New post 15 Dec 2017, 10:53
Chembeti wrote:
Jolene entered an 18-month investment contract that guarantees to pay 2 percent interest at the end of 6 months, another 3 percent interest at the end of 12 months, and 4 percent interest at the end of the 18 month contract. If each interest payment is reinvested in the contract, and Jolene invested $10,000 initially, what will be the total amount of interest paid during the 18-month contract?

A. $506.00
B. $726.24
C. $900.00
D. $920.24
E. $926.24


After 6 months, Jolene has 10,000 x 1.02 = 10,200 dollars.

After 12 months, Jolene has 10,200 x 1.03 = 10,506 dollars.

After 18 months, Jolene has 10,506 x 1.04 = 10,926.24 dollars.

Thus, the total interest made was 926.24 dollars.

Answer: E
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Re: Jolene entered an 18-month investment contract that  [#permalink]

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New post 03 Feb 2018, 15:50
Hi All,

This question is really just about staying organized and doing the calculations one 'step' at a time.

Given the interest payments at 6 months, 12 months and 18 months, the first bit of interest on the $10,000 would be...

6 months: $10,000 + (.02)(10,000) = $10,200
Interest = $200

At the 12 month mark, the interest would be on $10,200 though...

12 months: $10,200 + (.03)(10,200) = $10,506
Interest = $306

At the 18 month mark, the interest would be on $10,506...

18 months: $10,506 + (.04)(10,506) = about $10,926
Interest = about $420

The question asks for the TOTAL interest earned. We can either add up the 3 interest payments OR since we know the final TOTAL, we can subtract $10,000 to determine the interest.

Final Answer:

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Rich
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Re: Jolene entered an 18-month investment contract that  [#permalink]

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New post 31 Jul 2018, 01:35
I used 1/3 as the year, but evidently, no one included the year in their solving. Why?

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Re: Jolene entered an 18-month investment contract that  [#permalink]

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New post 16 Aug 2019, 08:50
Chembeti wrote:
Jolene entered an 18-month investment contract that guarantees to pay 2 percent interest at the end of 6 months, another 3 percent interest at the end of 12 months, and 4 percent interest at the end of the 18 month contract. If each interest payment is reinvested in the contract, and Jolene invested $10,000 initially, what will be the total amount of interest paid during the 18-month contract?

A. $506.00
B. $726.24
C. $900.00
D. $920.24
E. $926.24


2% 10k = 200
3% 10k + 3% 200 = 300 + 6 = 306
4% 10k + 4% 506 (200+306) = 400 + ~20.24 (5%-1% of 506 = 25.3-5.06 = 20.24…) = 520.24…
interest paid = 200 + 306 + 520.24… = 926.24…

Answer (E).
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Re: Jolene entered an 18-month investment contract that  [#permalink]

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New post 17 Aug 2019, 02:58
EMPOWERgmatRichC wrote:
Hi All,

This question is really just about staying organized and doing the calculations one 'step' at a time.

Given the interest payments at 6 months, 12 months and 18 months, the first bit of interest on the $10,000 would be...

6 months: $10,000 + (.02)(10,000) = $10,200
Interest = $200

At the 12 month mark, the interest would be on $10,200 though...

12 months: $10,200 + (.03)(10,200) = $10,506
Interest = $306

At the 18 month mark, the interest would be on $10,506...

18 months: $10,506 + (.04)(10,506) = about $10,926
Interest = about $420

The question asks for the TOTAL interest earned. We can either add up the 3 interest payments OR since we know the final TOTAL, we can subtract $10,000 to determine the interest.

Final Answer:

GMAT assassins aren't born, they're made,
Rich



what I'm not getting is why you guys are using 2% as 2% . shouldn't it be 1% because the interest is given in only 6 months ? and with this logic the 4% interest should also be multiplied with 1.5 ?

what am I missing here ? please explain

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Re: Jolene entered an 18-month investment contract that  [#permalink]

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New post 26 Aug 2019, 01:56
Chembeti wrote:
Jolene entered an 18-month investment contract that guarantees to pay 2 percent interest at the end of 6 months, another 3 percent interest at the end of 12 months, and 4 percent interest at the end of the 18 month contract. If each interest payment is reinvested in the contract, and Jolene invested $10,000 initially, what will be the total amount of interest paid during the 18-month contract?

A. $506.00
B. $726.24
C. $900.00
D. $920.24
E. $926.24

This is very simple problem,yet need to pay attention to words in the problem


interest computed for timeline of 18 months
~ 9% so option A & B can be negated leaving c,d,e we can find by
10,000 * 1.02*1.03*1.04 ; 10926.24 ;
interest ; 926.24
IMO E
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Re: Jolene entered an 18-month investment contract that  [#permalink]

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New post 26 Aug 2019, 12:18
jackfr2 wrote:
EMPOWERgmatRichC wrote:
Hi All,

This question is really just about staying organized and doing the calculations one 'step' at a time.

Given the interest payments at 6 months, 12 months and 18 months, the first bit of interest on the $10,000 would be...

6 months: $10,000 + (.02)(10,000) = $10,200
Interest = $200

At the 12 month mark, the interest would be on $10,200 though...

12 months: $10,200 + (.03)(10,200) = $10,506
Interest = $306

At the 18 month mark, the interest would be on $10,506...

18 months: $10,506 + (.04)(10,506) = about $10,926
Interest = about $420

The question asks for the TOTAL interest earned. We can either add up the 3 interest payments OR since we know the final TOTAL, we can subtract $10,000 to determine the interest.

Final Answer:

GMAT assassins aren't born, they're made,
Rich



what I'm not getting is why you guys are using 2% as 2% . shouldn't it be 1% because the interest is given in only 6 months ? and with this logic the 4% interest should also be multiplied with 1.5 ?

what am I missing here ? please explain

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Hi jackfr2,

If a question gives you an ANNUAL interest rate (meaning the rate that would occur if the calculation was done at the end of 1 year), but then asks you to calculate MORE than 1 time a year, then you divide the interest rate by the number of 'periods' in that year. For example, a 10% annual interest rate that's calculated every 6 months would be done in two '5% pieces" (one at the 6-month mark and one at that 12-month mark).

This question does NOT provide that type of information though. It tells us exactly what to calculate at each point in the timeline, so no adjustments to the calculation are needed.

GMAT assassins aren't born, they're made,
Rich
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Re: Jolene entered an 18-month investment contract that   [#permalink] 26 Aug 2019, 12:18

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