Hello Mitch,
I made a mistake while solving this question by calculating the initial interest as (10,000*2*6)/(100*12) and got the interest value as $100. Could you please help me understand why is this incorrect?
Regards,
Amit
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Interest and principle
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gmat_for_life
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GMATGuruNY
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The expression in red could serve to answer the following question:gmat_for_life wrote:Hello Mitch,
I made a mistake while solving this question by calculating the initial interest as (10,000*2*6)/(100*12) and got the interest value as $100. Could you please help me understand why is this incorrect?
Regards,
Amit
If $10,000 is invested in an account that earns 2% ANNUAL interest, how much interest is earned over the first 6 months?
But none of percentages in the posted problem are given as ANNUAL interest rates.
Thus, the expression in red is inappropriate.
From the prompt:
Jolene entered an 18-month investment contract that guarantees to pay 2 percent interest at the end of 6 months.
Thus, the interest earned at the end of 6 months = 2% of 10,000 = 200.
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gauravprashar17
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How would one solve this problem, if the interest were calculated every 6 months(@ 2% percent), every 12 months(@ 3%) and every 18 months(@4%) and the interest would be added everytime to the amount.
Also, how do we know that the interest is 2% per 6 month and not per year. Same for 3 and 4 %.
Also, how do we know that the interest is 2% per 6 month and not per year. Same for 3 and 4 %.
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rsarashi
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Hi GMATGuruNY ,But none of percentages in the posted problem are given as ANNUAL interest rates.
Thus, the expression in red is inappropriate.
Can you please explain what do you mean by the above statement? Because I was also taking time period.
Please explain sir.
Thanks
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GMATGuruNY
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If the prompt stated that the $10,000 investment earns 2% annual interest, then the interest earned in first 6 months could be calculated as follows:rsarashi wrote:Hi GMATGuruNY ,But none of percentages in the posted problem are given as ANNUAL interest rates.
Thus, the expression in red is inappropriate.
Can you please explain what do you mean by the above statement? Because I was also taking time period.
Please explain sir.
Thanks
Annual interest = 2% of 10,000 = $200.
Interest after 6 months = half the annual interest = (1/2)(200) = $100.
But the prompt does NOT indicate that 2% is an ANNUAL interest rate.
It states only that the contract will pay 2 percent interest at the end of 6 months.
Thus, the interest earned after 6 months = 2% of 10,000 = $200.
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Followed here and elsewhere by over 1900 test-takers.
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For more information, please email me (Mitch Hunt) at [email protected].
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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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Matt@VeritasPrep
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Good question to ask! This concept will be important in your MBA as well - you need to know the terms, how often the interest is compounded, etc.rsarashi wrote:Hi GMATGuruNY ,But none of percentages in the posted problem are given as ANNUAL interest rates.
Thus, the expression in red is inappropriate.
Can you please explain what do you mean by the above statement? Because I was also taking time period.
Please explain sir.
Thanks
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Jeff@TargetTestPrep
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After 6 months, Jolene has 10,000 x 1.02 = 10,200 dollars.muralithe1 wrote:Jolene entered an 18-month investment contract that guarantees to pay 2 percent interest at the end of 6 months, another 3 percent interest at the end of 12 months, and 4 percent interest at the end of the 18 month contract. If each interest payment is reinvested in the contract, and Jolene invested $10,000 initially, what will be the total amount of interest paid during the 18-month contract?
A. $506.00
B. $726.24
C. $900.00
D. $920.24
E. $926.24
After 12 months, Jolene has 10,200 x 1.03 = 10,506 dollars.
After 18 months, Jolene has 10,506 x 1.04 = 10,926.24 dollars.
Thus, the total interest made was 926.24 dollars.
Answer: E
