BREAKING: Target Test Prep releases Brand New 2026 On Demand GMAT prep course

Redeem
TTP OnDemand GMAT Video Course
Featured Course

Target Test Prep GMAT OnDemand

Scott Woodbury-Stewart’s private virtual classroom — 400 hours of master-class video lessons for the GMAT Focus Edition.

  • 715+ score guarantee — highest in the industry (99th percentile)
  • 52 chapters · 1,500+ lessons · 4,000+ practice questions
  • 400 hours of video · 1,500+ instructor-led HD smartboard lessons
  • 300,000+ students accepted to Harvard, Stanford, Wharton, Booth & Sloan & more
  • 24/7 live support + weekly Zoom office hours with GMAT instructors
  • TTP AI Assist — 24/7 AI-powered virtual tutor for instant help
  • 1,200+ flashcards + AI-powered study assistant & daily calendar
  • OnDemand, LiveTeach & GMAT Bootcamp formats available
  • Also: GRE, SAT Math & Executive Assessment courses
  • MBA Admissions Consulting now available
  • 🏆 2025 EdTech Breakthrough Award: Test Prep Solution Provider of the Year
  • 200,000+ students served
  • 5-day free trial — $0 to start, no auto-billing, cancel anytime
★★★★★ 5.0 (559 reviews)
130-pt guarantee
$0 to start then $127/mo
Start Free 5-Day Trial Read 559 Reviews →

Compound interest problem

Expert replies
Post new topic Post Reply
Previous Topic Next Topic
Legendary Member
Posts: 641
Joined: Tue Feb 14, 2012 3:52 pmFollowed by: 8 members
Thanked: 11 times
by gmattesttaker2 » Thu Jul 05, 2012 10:44 pm
Hello,

Came across this problem in MGMAT Guide 1 (5th edition)

A bank account with $100 earns 8% annual interest, compounded quarterly. If there are no deposits or withdrawals, how much money will be in the account after 6 months?

[spoiler]Answer is $104.04[/spoiler]

Wasn't clear with the solution given there. Can you please assist? Thanks a lot.

Best Regards,
Sri
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
Source: — Problem Solving |
User avatar
Legendary Member
Posts: 520
Joined: Sat Apr 28, 2012 9:12 pmFollowed by: 49 members
Thanked: 339 times
GMAT Score:770

by eagleeye » Fri Jul 06, 2012 3:13 am
For compound interest: Total amount after time t = A = P*(1+r/100)^t.

A bank account with $100 earns 8% annual interest, compounded quarterly. If there are no deposits or withdrawals, how much money will be in the account after 6 months?

There are 4 quarters each year. Each has 3 months in it.
Since interest is compounded quarterly, we need to find the quarterly rate.
Quarterly rate r= Annual Rate/(Number of Quarters in one year) = 8/4 = 2%.
We need to find the amount after 6 months, i.e. 2 quarters, so time t = 2.
Principal P = 100.

Now its easy.
Amount A = P*(1+r/100)^t = 100* (1+2/100)^2 = 100* 1.02^2 = 100* 1.0404 = 104.04
Top
Join the discussion
Log in to postLogin with Googleuse password
QUOTE IN REPLY
Post new topic Post Reply
• Page 1 of 1