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ps INTEREST ( ddelta course )

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Senior Manager
Joined: 30 May 2005
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ps INTEREST ( ddelta course ) [#permalink]

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13 Sep 2005, 14:27
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hello

here it is ....

Ricardo deposits \$1,000 in a bank account that pays 10%
interest, compounded semiannually. Poonam deposits \$1,000 in
a bank account that pays 10% interest, compounded annually.
If no more deposits are made, what is the difference between
the two account balances after 1 year?

A. \$2.50
B. \$10
C. \$5
D. \$15
E. \$100

plz explains yours works
thanks

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VP
Joined: 22 Aug 2005
Posts: 1111

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Location: CA

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13 Sep 2005, 14:40
A \$ 2.50

For Poonam, interest =
1000 * 10 / 100 (for 10%) * 1 (1 year)
or
\$ 100

For Ricardo, Interest:

1000 * (1 + (10/2)/100) ^2 - 1000
(since interest is comounded semi-annually we double number of period (to 2) and half the interest rate (10/2))

= \$ 102.5

ans: \$102.5 - \$100 = \$2.50

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13 Sep 2005, 14:40
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