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

 It is currently 16 Aug 2018, 08:53

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

Sarah invested \$38,700 in an account that paid 6.2% annual

Author Message
TAGS:

Hide Tags

Director
Status: Finally Done. Admitted in Kellogg for 2015 intake
Joined: 25 Jun 2011
Posts: 510
Location: United Kingdom
GMAT 1: 730 Q49 V45
GPA: 2.9
WE: Information Technology (Consulting)
Sarah invested \$38,700 in an account that paid 6.2% annual  [#permalink]

Show Tags

12 Mar 2014, 21:31
1
11
00:00

Difficulty:

85% (hard)

Question Stats:

56% (01:58) correct 44% (02:01) wrong based on 156 sessions

HideShow timer Statistics

Sarah invested \$38,700 in an account that paid 6.2% annual interest, compounding monthly. She left the money in this account, collecting interest for three full years. Approximately how much interest did she earn in the last month of this period?

A) \$239.47
B )\$714.73
C) \$2793.80
D) \$7,888.83
E) \$15,529.61

Any idea how to do this question please?

_________________

Best Regards,
E.

MGMAT 1 --> 530
MGMAT 2--> 640
MGMAT 3 ---> 610
GMAT ==> 730

Veritas Prep GMAT Instructor
Joined: 16 Oct 2010
Posts: 8187
Location: Pune, India
Re: Sarah invested \$38,700 in an account that paid 6.2% annual  [#permalink]

Show Tags

12 Mar 2014, 23:41
5
5
enigma123 wrote:
Sarah invested \$38,700 in an account that paid 6.2% annual interest, compounding monthly. She left the money in this account, collecting interest for three full years. Approximately how much interest did she earn in the last month of this period?

A) \$239.47
B )\$714.73
C) \$2793.80
D) \$7,888.83
E) \$15,529.61

Any idea how to do this question please?

The numbers are far too complicated so obviously you are expected to approximate a lot. That is the reason the options are so far apart.

With the given options, it is obvious that monthly interest rate will be about 6.2/12 = .5%
.5% of 38,700 will be less than 200 (since 1% is 387) and hence the monthly interest earned after 3 yrs can only be option (A). All other options are far too large.

Assume options were a little closer.
P = 38,700
Annual Interest = 6.2%
Since the interest is compounded monthly, the effective annual rate will be higher. Let's assume it is something close to 7%. The easiest interest calculation is using simple interest. If the interest was accumulated using SI at 7%, in 3 yrs, we would have accumulated about 20% of 38,700 which is one fifth of 38,700, say about 8000. This brings the total amount up to about 47000 at the end of 3 yrs. In the last month, the interest will be calculated on this figure since it is compounded.
The monthly interest rate will be 6.2/12 = .5% approximately.
.5% of 47000 will be about 235 (since 1% will be 470).

Even if the options were a little closer, this method would have led you to the correct answer.
_________________

Karishma
Veritas Prep GMAT Instructor

Save up to \$1,000 on GMAT prep through 8/20! Learn more here >

GMAT self-study has never been more personalized or more fun. Try ORION Free!

General Discussion
VP
Joined: 02 Jul 2012
Posts: 1192
Location: India
Concentration: Strategy
GMAT 1: 740 Q49 V42
GPA: 3.8
WE: Engineering (Energy and Utilities)
Re: Sarah invested \$38,700 in an account that paid 6.2% annual  [#permalink]

Show Tags

12 Mar 2014, 21:59
2
1% of 38700 is 387
6% is approximately 2400
At the end of first year, total amount = 38700+2400 = 41000 (approx)
At the end of second year, total amount = 41000+2400 (6% of 41000 works out to approximately the same) = 43400 (approx)

So total earnings for third year cannot be more than 6% of 43400 i.e at max \$3000
So monthly earning has to be in the range of 250.

_________________

Did you find this post helpful?... Please let me know through the Kudos button.

Thanks To The Almighty - My GMAT Debrief

GMAT Reading Comprehension: 7 Most Common Passage Types

Manager
Joined: 24 Jul 2014
Posts: 94
Location: India
WE: Information Technology (Computer Software)
Re: Sarah invested \$38,700 in an account that paid 6.2% annual  [#permalink]

Show Tags

01 Feb 2016, 19:25
Nice Sum :D
Calculating simple interest for a month will be enough.
The compound interest for a month will be nearer to it but a little larger that the result
_________________

The Mind ~ Muscle Connection
My GMAT Journey is Complete.Going to start the MBA in Information Management from 2016
Good Luck everyone.

EMPOWERgmat Instructor
Status: GMAT Assassin/Co-Founder
Affiliations: EMPOWERgmat
Joined: 19 Dec 2014
Posts: 12181
Location: United States (CA)
GMAT 1: 800 Q51 V49
GRE 1: Q170 V170
Re: Sarah invested \$38,700 in an account that paid 6.2% annual  [#permalink]

Show Tags

04 Feb 2016, 12:31
2
1
Hi All,

While this question 'looks' complex, the answer choices to this question are so 'spread out' that you avoid almost all of the math and use logic to get the correct answer.

We're told that Sarah invested \$38,700 in an account that paid 6.2% ANNUAL interest, compounded MONTHLY, for three full years. We're asked approximately how much interest she earned in the last month of this period.

As an aside, for a question that asks for an 'approximate' answer, these answers are far too exact. The GMAT would present these answers differently. That having been said, here's how you can answer this question relatively quickly:

With an annual interest rate of 6.2% and 12 monthly compounding periods per year, the account would receive about....

6%/12 = 0.5% interest per month.

1% of \$38,700 = \$387, so....

.5% of \$38,700 = about \$193

Over time, 'compounding' would take effect, so each monthly interest increase would be SLIGHTLY higher than the one that preceded it. This is meant to say that the original \$193 would increase in really small increments over those 3 years, so there's really only one answer that makes sense.

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
Official GMAT Exam Packs + 70 Pt. Improvement Guarantee
www.empowergmat.com/

***********************Select EMPOWERgmat Courses now include ALL 6 Official GMAC CATs!***********************

SVP
Joined: 26 Mar 2013
Posts: 1777
Re: Sarah invested \$38,700 in an account that paid 6.2% annual  [#permalink]

Show Tags

04 Feb 2016, 16:09
The numbers are far too complicated so obviously you are expected to approximate a lot. That is the reason the options are so far apart.

With the given options, it is obvious that monthly interest rate will be about 6.2/12 = .5%
.5% of 38,700 will be less than 200 (since 1% is 387) and hence the monthly interest earned after 3 yrs can only be option (A). All other options are far too large.

Assume options were a little closer.
P = 38,700
Annual Interest = 6.2%
Since the interest is compounded monthly, the effective annual rate will be higher. Let's assume it is something close to 7%. The easiest interest calculation is using simple interest. If the interest was accumulated using SI at 7%, in 3 yrs, we would have accumulated about 20% of 38,700 which is one fifth of 38,700, say about 8000. This brings the total amount up to about 47000 at the end of 3 yrs. In the last month, the interest will be calculated on this figure since it is compounded.
The monthly interest rate will be 6.2/12 = .5% approximately.
.5% of 47000 will be about 235 (since 1% will be 470).

Even if the options were a little closer, this method would have led you to the correct answer.[/quote]

Hi,

I do not understand the highlighted above? why did you assume 7%
Veritas Prep GMAT Instructor
Joined: 16 Oct 2010
Posts: 8187
Location: Pune, India
Re: Sarah invested \$38,700 in an account that paid 6.2% annual  [#permalink]

Show Tags

04 Feb 2016, 20:37
1
Mo2men wrote:
The numbers are far too complicated so obviously you are expected to approximate a lot. That is the reason the options are so far apart.

With the given options, it is obvious that monthly interest rate will be about 6.2/12 = .5%
.5% of 38,700 will be less than 200 (since 1% is 387) and hence the monthly interest earned after 3 yrs can only be option (A). All other options are far too large.

Assume options were a little closer.
P = 38,700
Annual Interest = 6.2%
Since the interest is compounded monthly, the effective annual rate will be higher. Let's assume it is something close to 7%. The easiest interest calculation is using simple interest. If the interest was accumulated using SI at 7%, in 3 yrs, we would have accumulated about 20% of 38,700 which is one fifth of 38,700, say about 8000. This brings the total amount up to about 47000 at the end of 3 yrs. In the last month, the interest will be calculated on this figure since it is compounded.
The monthly interest rate will be 6.2/12 = .5% approximately.
.5% of 47000 will be about 235 (since 1% will be 470).

Even if the options were a little closer, this method would have led you to the correct answer.

Hi,

I do not understand the highlighted above? why did you assume 7%[/quote]

The given annual interest rate is 6.2% but the interest is compounded monthly. This means that the effective interest rate will be more than 6.2%. The integer after 6.2% is 7% so I approximated the effective interest rate to be 7%. It is more than what the actual effective annual interest rate will be (around 6.4%) but then, we intend to calculate simple interest and not compounded for 3 yrs hence a higher rate is justified. Note that our approximated answer (235) is very close to the actual answer (239.47).
_________________

Karishma
Veritas Prep GMAT Instructor

Save up to \$1,000 on GMAT prep through 8/20! Learn more here >

GMAT self-study has never been more personalized or more fun. Try ORION Free!

BSchool Forum Moderator
Joined: 12 Aug 2015
Posts: 2649
GRE 1: Q169 V154
Re: Sarah invested \$38,700 in an account that paid 6.2% annual  [#permalink]

Show Tags

14 Apr 2016, 02:35
VeritasPrepKarishma wrote:
enigma123 wrote:
Sarah invested \$38,700 in an account that paid 6.2% annual interest, compounding monthly. She left the money in this account, collecting interest for three full years. Approximately how much interest did she earn in the last month of this period?

A) \$239.47
B )\$714.73
C) \$2793.80
D) \$7,888.83
E) \$15,529.61

Any idea how to do this question please?

The numbers are far too complicated so obviously you are expected to approximate a lot. That is the reason the options are so far apart.

With the given options, it is obvious that monthly interest rate will be about 6.2/12 = .5%
.5% of 38,700 will be less than 200 (since 1% is 387) and hence the monthly interest earned after 3 yrs can only be option (A). All other options are far too large.

Assume options were a little closer.
P = 38,700
Annual Interest = 6.2%
Since the interest is compounded monthly, the effective annual rate will be higher. Let's assume it is something close to 7%. The easiest interest calculation is using simple interest. If the interest was accumulated using SI at 7%, in 3 yrs, we would have accumulated about 20% of 38,700 which is one fifth of 38,700, say about 8000. This brings the total amount up to about 47000 at the end of 3 yrs. In the last month, the interest will be calculated on this figure since it is compounded.
The monthly interest rate will be 6.2/12 = .5% approximately.
.5% of 47000 will be about 235 (since 1% will be 470).

Even if the options were a little closer, this method would have led you to the correct answer.

"EVEN iF THE ANSWERS CHOICES WERE CLOSER "
Hmm Makes me wonder =>
279
280
281
290
_________________

MBA Financing:- INDIAN PUBLIC BANKS vs PRODIGY FINANCE!

Getting into HOLLYWOOD with an MBA!

The MOST AFFORDABLE MBA programs!

STONECOLD's BRUTAL Mock Tests for GMAT-Quant(700+)

AVERAGE GRE Scores At The Top Business Schools!

Veritas Prep GMAT Instructor
Joined: 16 Oct 2010
Posts: 8187
Location: Pune, India
Re: Sarah invested \$38,700 in an account that paid 6.2% annual  [#permalink]

Show Tags

14 Apr 2016, 05:45
stonecold wrote:
VeritasPrepKarishma wrote:
enigma123 wrote:
Sarah invested \$38,700 in an account that paid 6.2% annual interest, compounding monthly. She left the money in this account, collecting interest for three full years. Approximately how much interest did she earn in the last month of this period?

A) \$239.47
B )\$714.73
C) \$2793.80
D) \$7,888.83
E) \$15,529.61

Any idea how to do this question please?

The numbers are far too complicated so obviously you are expected to approximate a lot. That is the reason the options are so far apart.

With the given options, it is obvious that monthly interest rate will be about 6.2/12 = .5%
.5% of 38,700 will be less than 200 (since 1% is 387) and hence the monthly interest earned after 3 yrs can only be option (A). All other options are far too large.

Assume options were a little closer.
P = 38,700
Annual Interest = 6.2%
Since the interest is compounded monthly, the effective annual rate will be higher. Let's assume it is something close to 7%. The easiest interest calculation is using simple interest. If the interest was accumulated using SI at 7%, in 3 yrs, we would have accumulated about 20% of 38,700 which is one fifth of 38,700, say about 8000. This brings the total amount up to about 47000 at the end of 3 yrs. In the last month, the interest will be calculated on this figure since it is compounded.
The monthly interest rate will be 6.2/12 = .5% approximately.
.5% of 47000 will be about 235 (since 1% will be 470).

Even if the options were a little closer, this method would have led you to the correct answer.

"EVEN iF THE ANSWERS CHOICES WERE CLOSER "
Hmm Makes me wonder =>
279
280
281
290

The correct answer is 239.47 which your options don't have. Besides, you are not given a calculator in the Quant section of GMAT so you are not expected to do tedious calculations. All I meant to say was that even if options were like 210, 240, 270 ... etc, you could have got the answer. Without a calculator, you will not be expected to calculate anything closer.
_________________

Karishma
Veritas Prep GMAT Instructor

Save up to \$1,000 on GMAT prep through 8/20! Learn more here >

GMAT self-study has never been more personalized or more fun. Try ORION Free!

Manager
Joined: 14 May 2015
Posts: 52
Re: Sarah invested \$38,700 in an account that paid 6.2% annual  [#permalink]

Show Tags

07 May 2017, 13:37
6.5%/12 = .54% or .5%
38700*5/1000=200 approx
(1+.005)^35= 1.xxx approx
200*1.xxx<714
Non-Human User
Joined: 09 Sep 2013
Posts: 7721
Re: Sarah invested \$38,700 in an account that paid 6.2% annual  [#permalink]

Show Tags

13 May 2018, 04:37
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: Sarah invested \$38,700 in an account that paid 6.2% annual &nbs [#permalink] 13 May 2018, 04:37
Display posts from previous: Sort by

Events & Promotions

 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®.