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vidhimistry
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GMATGuruNY
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The formula for repeated percent change in which a value is repeatedly increased by r%:vidhimistry wrote:A 2-year certificate of deposit is purchased for k dollars. If the certificate earns interest at an annual rate of 6 percent compounded quarterly, which of the following represents the value, in dollars, of the certificate at the end of the 2 years ?
Final amount = Original Amount * (1 + r/100)^number of changes.
In the problem above:
Original amount = k.
r = 6/4 = 1.5. (Every quarter the certificate receives 1/4 of the 6 percent interest.)
Number of changes in 2 years = 8. (Every quarter for 2 years = 4*2 = 8 changes).
Thus:
Final amount = k*(1 + 1.5/100)� = k*(1.015)�.
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Followed here and elsewhere by over 1900 test-takers.
I have worked with students based in the US, Australia, Taiwan, China, Tajikistan, Kuwait, Saudi Arabia -- a long list of countries.
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MAAJ
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I got a different formula, where am I wrong?
K * (1 + i)^n
i = interest rate. Because 6% is anually we must convert it to a quaterly interest rate. Because there are "three" quaters in a year (3 * 4Q = 12) , then we must divide the interest rate by 3. So instead of 0.06 we should use 0.02
n = # capitalizations. If in one year there are 3 quaters, in two years there should be 6 quaters. So we must use n = 6 to calculate compound interest 6 times.
Putting it all together:
K *(1+0.02)^6
K *(1.02)^6
K * (1 + i)^n
i = interest rate. Because 6% is anually we must convert it to a quaterly interest rate. Because there are "three" quaters in a year (3 * 4Q = 12) , then we must divide the interest rate by 3. So instead of 0.06 we should use 0.02
n = # capitalizations. If in one year there are 3 quaters, in two years there should be 6 quaters. So we must use n = 6 to calculate compound interest 6 times.
Putting it all together:
K *(1+0.02)^6
K *(1.02)^6
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pankajks2010
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In a year there are 4 quarters and every quarter has 3 months.
Thus, the annual interest rate would get divided by 4 and not 3.
Similarly, the time period (n) would become 2*4=8 and not 6.
Thus, the annual interest rate would get divided by 4 and not 3.
Similarly, the time period (n) would become 2*4=8 and not 6.
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MAAJ
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Oh now I see... it's a bit different in spanish...
I though quaterly meant "cuatrimestralmente" in spanish, which means every four months.
Verbal is killing me even in the Quantitative section
I though quaterly meant "cuatrimestralmente" in spanish, which means every four months.
Verbal is killing me even in the Quantitative section
pankajks2010 wrote:In a year there are 4 quarters and every quarter has 3 months.
Thus, the annual interest rate would get divided by 4 and not 3.
Similarly, the time period (n) would become 2*4=8 and not 6.
"There's a difference between interest and commitment. When you're interested in doing something, you do it only when circumstance permit. When you're committed to something, you accept no excuses, only results."
