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Compound interest DS Q from Kaplan math WB 324 Q 22

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by nonimelb » Sun Mar 29, 2009 4:15 am
Following is a DS question. Please help me to explain the concept behind it. In my openion the answer should be 1 using the usual formula of compound interest but the book says it is 3 means statements 1 and 2 taken together are sufficient. Please try and explain which option is right?

Q: Mr. Daniels deposits $10,000 in a savings certificate, he earns p percent annual interest compounded quaterly. What is the value of p?
(1) During the term of the certificate , he earns $ 18 more than he would if the interest were not compounded.
(2) He withdraws all the money six months after depositing it.

What would be the answer choise

1,2,3,4,5?
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Source: — Data Sufficiency |
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by chetanojha » Sun Mar 29, 2009 6:07 am
To find the value of P i.e. interest rate. You need the following information:

1. Total interest earned.
2. Period for which interest is earned i.e. 6 months, 1 years etc.

Now
Answer Choice 1: Only gives you total interest earned but not period. So NOT SUFFICIENT.

Answer Choice 2: Only gives you period for which interest is earned but not the amount. Hence NOT SUFFICIENT.

Taken Together you have all pre-requisite. Hence C.
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by chetanojha » Sun Mar 29, 2009 6:18 am
To find the value of P i.e. interest rate. You need the following information:

1. Total interest earned.
2. Period for which interest is earned i.e. 6 months, 1 years etc.

Now
Answer Choice 1: Only gives you total interest earned but not period. So NOT SUFFICIENT.

Answer Choice 2: Only gives you period for which interest is earned but not the amount. Hence NOT SUFFICIENT.

Taken Together you have all pre-requisite. Hence C.
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by chetanojha » Sun Mar 29, 2009 6:21 am
To find the value of P i.e. interest rate. You need the following information:

1. Total interest earned.
2. Period for which interest is earned i.e. 6 months, 1 years etc.

Now
Answer Choice 1: Only gives you total interest earned but not period. So NOT SUFFICIENT.

Answer Choice 2: Only gives you period for which interest is earned but not the amount. Hence NOT SUFFICIENT.

Taken Together you have all pre-requisite. Hence C.
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by nonimelb » Sun Mar 29, 2009 9:06 am
1. During the term of the certificate , he earns $ 18 more than he would if the interest were not compounded.
now by looking at option 1 , what I get is that , if the interest were not compounded then the interest would have been SIMPLE INTEREST =principle*rate*time/100

so compound interest-simple interest= 18

Now I am not sure that should I bring in the simple interest concept here or not but there are 2 types of interests only, so if it is not compound, it has to be simple.

mmmmmmmmmmmmmmm what do you think?
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