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03 Jan 2016, 11:10
Expert's post
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15% (low)

Question Stats:

80% (00:40) correct 20% (01:37) wrong based on 74 sessions

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Ms. Lopez deposits $100 in an account that pays 20% interest, compounded semiannually. How much money will there be in the account at the end of one year? A.$118.00
B. $120.00 C.$121.00
D. $122.00 E.$140.00
[Reveal] Spoiler: OA

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Posts: 5662
Re: Ms. Lopez deposits $100 in an account that pays 20% interest, compoun [#permalink] ### Show Tags 04 Jan 2016, 21:26 Bunuel wrote: Ms. Lopez deposits$ 100 in an account that pays 20% interest, compounded semiannually. How much money will there be in the account at the end of one year?

A. $118.00 B.$120.00
C. $121.00 D.$122.00
E. $140.00 Hi, let me explain the concept for those who are not familiar with compounded semi annually/ quarterly etc.. it basically means, here, that the interest will be paid twice, after 6 months and at the end of year..so twice.. but interest is 20%, which will get distributed semiannually that is 10%... so the Q literally means .. after 6 months.. 100*10/100 + 100=110.. at the end of year 110*10/100 + 110= 121.. or we put it in compound interest formula.. where CI=10%, T is 2 and P=100.. so amount = 100(1 + 10/100)^2=100*1.1*1.1=121.. C _________________ Absolute modulus :http://gmatclub.com/forum/absolute-modulus-a-better-understanding-210849.html#p1622372 Combination of similar and dissimilar things : http://gmatclub.com/forum/topic215915.html BANGALORE/- Current Student Joined: 02 Jun 2015 Posts: 66 Location: United States Concentration: Strategy, Human Resources WE: Engineering (Manufacturing) Re: Ms. Lopez deposits$ 100 in an account that pays 20% interest, compoun [#permalink]

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05 Jan 2016, 13:31
Ans C

Using Formula - A = P(1+r/n)^nt

Given
P=100
n=2
t=1
r=0.2

Substituting value in formula

A = 100(1+0.2/2)^2

A= 121.00$Thank You Bunuel wrote: Ms. Lopez deposits$ 100 in an account that pays 20% interest, compounded semiannually. How much money will there be in the account at the end of one year?

A. $118.00 B.$120.00
C. $121.00 D.$122.00
E. $140.00 Manager Status: single Joined: 19 Jan 2015 Posts: 95 Location: India GPA: 3.2 WE: Sales (Pharmaceuticals and Biotech) Re: Ms. Lopez deposits$ 100 in an account that pays 20% interest, compoun [#permalink]

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05 Jan 2016, 18:28
initial deposit 100 rs 20% compounded semiannually.

semianually means compounded for 6 months.

here 20% becomes 10% and compounded twice per year,

then 100 rs becomes 110 after six months, and becomes 121 after one year.
so option C is correct.
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Re: Ms. Lopez deposits $100 in an account that pays 20% interest, compoun [#permalink] ### Show Tags 07 Jan 2016, 13:21 Expert's post 1 This post was BOOKMARKED Hi All, The formula for Compound Interest is... (Principal)(1 + R)^T where R is the interest rate (as a decimal) and T is the length of time (almost always in years). Although it's relatively rare, the GMAT might ask you to deal with interest that is calculated MORE OFTEN than once a year. When that occurs, you have to make some adjustments to the above formula. For example, if interest in calculated TWICE a year, then T is DOUBLED, but R is HALVED. In that same way, if interest is calculated THREE TIMES a year, then T is TRIPLED, but R is DIVIDED BY 3. Etc. In this question, calculating interest SEMI-ANNUALLY means "twice a year", so the variables become T=2 and R=10; you can then calculate the answer. GMAT assassins aren't born, they're made, Rich _________________ 760+: Learn What GMAT Assassins Do to Score at the Highest Levels Contact Rich at: Rich.C@empowergmat.com # Rich Cohen Co-Founder & GMAT Assassin Special Offer: Save$75 + GMAT Club Tests Free
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18 May 2017, 12:19
Ms. Lopez deposits $100 in an account that pays 20% interest, compounded semiannually. How much money will there be in the account at the end of one year? A.$118.00
B. $120.00 C.$121.00
D. $122.00 E.$140.00

Amount = P $$(1 + \frac{R}{100})^n$$ (P = Principal, R = Rate of interest, n = Time)
Rate of interest is compounded semi- annually = $$\frac{20}{2}$$ = 10% in 6 months
Therefore n = 2 (Annually is 12 months, Compounded semi - annually is 6 months = $$\frac{12}{6}$$ = 2)
Amount = 100 $$(1 + \frac{10}{100})^2$$ = 100 * $$\frac{11}{10} *\frac{11}{10}$$ = $121 Answer C... _________________ Kindly press "+1 Kudos" to appreciate Ms. Lopez deposits$ 100 in an account that pays 20% interest, compoun   [#permalink] 18 May 2017, 12:19
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# Ms. Lopez deposits \$ 100 in an account that pays 20% interest, compoun

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