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Compounded Interest

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Compounded Interest

by money9111 » Sat Feb 06, 2010 4:47 pm
Lori deposits $100 in a savings account at 2% interest, compounded annually. After 3 years, what is the balance on the account? (assume Lori makes no withdrawals or deposits.)

I know how to figure this out... but can someone show me how to do this the quickest way?
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by Osirus@VeritasPrep » Sat Feb 06, 2010 6:16 pm
You have to multiply 100 by 1.02. multipy 102 by 1.02. multiply 104.12 by 1.02 and you have your answer. That's the only way to do it.

The sad thing is, I didn't do any of those calculations. I've drilled that stuff so often I remember the exact values...lol.
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by sadullaevd » Sat Feb 06, 2010 6:59 pm
osirus0830 wrote:You have to multiply 100 by 1.02. multipy 102 by 1.02. multiply 104.12 by 1.02 and you have your answer. That's the only way to do it.

The sad thing is, I didn't do any of those calculations. I've drilled that stuff so often I remember the exact values...lol.

Shouldn't that be 104.04? Or am i missing any calculation?
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by Osirus@VeritasPrep » Sat Feb 06, 2010 6:59 pm
sadullaevd wrote:
osirus0830 wrote:You have to multiply 100 by 1.02. multipy 102 by 1.02. multiply 104.12 by 1.02 and you have your answer. That's the only way to do it.

The sad thing is, I didn't do any of those calculations. I've drilled that stuff so often I remember the exact values...lol.

Shouldn't that be 104.04? Or am i missing any calculation?
yeah you're right

its 104.04 and the final answer is 106.12
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by Stuart@KaplanGMAT » Sat Feb 06, 2010 8:19 pm
money9111 wrote:Lori deposits $100 in a savings account at 2% interest, compounded annually. After 3 years, what is the balance on the account? (assume Lori makes no withdrawals or deposits.)

I know how to figure this out... but can someone show me how to do this the quickest way?
On the GMAT, the answer would almost certainly be (1.02)^3, rather than in expanded form. One thing we're almost never required to do on the actual test is the type of multiplication or division that we'd just plug into a calculator (or computer, or accounting department) in real life.

Compound interest questions on the GMAT test our knowledge of the formula, not the arithmetic.
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