GMAT Question of the Day - Daily to your Mailbox; hard ones only

 It is currently 21 Feb 2019, 03:53

### GMAT Club Daily Prep

#### Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

## Events & Promotions

###### Events & Promotions in February
PrevNext
SuMoTuWeThFrSa
272829303112
3456789
10111213141516
17181920212223
242526272812
Open Detailed Calendar
• ### Online GMAT boot camp for FREE

February 21, 2019

February 21, 2019

10:00 PM PST

11:00 PM PST

Kick off your 2019 GMAT prep with a free 7-day boot camp that includes free online lessons, webinars, and a full GMAT course access. Limited for the first 99 registrants! Feb. 21st until the 27th.
• ### Free GMAT RC Webinar

February 23, 2019

February 23, 2019

07:00 AM PST

09:00 AM PST

Learn reading strategies that can help even non-voracious reader to master GMAT RC. Saturday, February 23rd at 7 AM PT

### Show Tags

08 Oct 2017, 08:54
1
6
00:00

Difficulty:

45% (medium)

Question Stats:

63% (02:00) correct 37% (02:30) wrong based on 38 sessions

### HideShow timer Statistics

Ron deposits $400 in savings account which gives compound interest semi-annually at the rate of 8% p.a. Approximately, how much interest does he receive in 2 years? (A)$60

(B) $64 (C)$68

(D) $72 (E)$76

_________________

---------------------------------------------------------------
Target - 720-740
Project PS Butler - https://gmatclub.com/forum/project-ps-butler-practice-everyday-280904.html
http://gmatclub.com/forum/information-on-new-gmat-esr-report-beta-221111.html
http://gmatclub.com/forum/list-of-one-year-full-time-mba-programs-222103.html

Senior SC Moderator
Joined: 22 May 2016
Posts: 2490
Ron deposits $400 in savings account which gives compound interest [#permalink] ### Show Tags 08 Oct 2017, 18:52 1 HKD1710 wrote: Ron deposits$400 in savings account which gives compound interest semi-annually at the rate of 8% p.a. Approximately, how much interest does he receive in 2 years?

(A) $60 (B)$64

(C) $68 (D)$72

(E) $76 Ron's money earns 1.04 percent interest every six months over two years for a total of four payments. Total amount earned with compound interest** is given by $$A = P(1 + \frac{r}{n})^{nt}$$, thus $$400(1.04)^4$$ The problem: the arithmetic and these answers. 1.04$$^{x}$$ behaves much differently than .04$$^{x}$$ does, so there are more numbers and more decimal places to multiply. And these answer choices are wickedly close. I decided that a yearly compounding rate of 1.08 * 1.08 was going to have to be close enough. 1.08 * 1.08 = 1.1664 1.1664 *$400 = $466.56 I had rounded down. The actual figure would be slightly more than that. And I was annoyed enough by then that "pretty close" was good enough.* Interest earned:$466.56 - 400 = $66.56 = approximately$68

I don't usually announce time taken. I think it matters here: 56 seconds. It's doable.

*After, I multiplied on a calculator to see the actual figures:

1.04$$^4$$ = 1.16985856, * $400 =$467.943424

From above, by hand:
1.08 * 1.08 = 1.1664, * 400 = $466.56. The first answer is exact and decisively points you to C. The second isn't as decisive, but if you remember that you have rounded down using 1.08, Answer C is the right choice. ** r is the decimal interest rate n is the number of periods t is time in years P is principal Total amount Divide .08 by 2 = .04. Add .04 to 1 = 1.04 = rate of interest payment every 6 months. There are 2 pay periods, and two years = 4 payments. _________________ To live is the rarest thing in the world. Most people just exist. Oscar Wilde Non-Human User Joined: 09 Sep 2013 Posts: 9875 Re: Ron deposits$400 in savings account which gives compound interest  [#permalink]

### Show Tags

06 Feb 2019, 07:38
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).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
_________________
Re: Ron deposits $400 in savings account which gives compound interest [#permalink] 06 Feb 2019, 07:38 Display posts from previous: Sort by # Ron deposits$400 in savings account which gives compound interest

 new topic post reply Question banks Downloads My Bookmarks Reviews Important topics

 Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.