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100 points for $49 worth of Veritas practice GMATs FREE VERITAS PRACTICE GMAT EXAMS Earn 10 Points Per Post Earn 10 Points Per Thanks Earn 10 Points Per Upvote ## Compound interest questions tagged by: Brent@GMATPrepNow ##### This topic has 4 expert replies and 1 member reply ## Compound interest questions How could I solve the compound interest questions when they ask for calculating the rate to a high power Like 17,000 * 1.0082^8 for example Is there an easy way to solve this ### GMAT/MBA Expert GMAT Instructor Joined 08 Dec 2008 Posted: 12922 messages Followed by: 1248 members Upvotes: 5254 GMAT Score: 770 Shikatokika wrote: How could I solve the compound interest questions when they ask for calculating the rate to a high power Like 17,000 * 1.0082^8 for example Is there an easy way to solve this On the GMAT, you'd never be required to make such a calculation. Cheers, Brent _________________ Brent Hanneson â€“ Creator of GMATPrepNow.com Use my video course along with Sign up for free Question of the Day emails And check out all of these free resources GMAT Prep Now's comprehensive video course can be used in conjunction with Beat The GMATâ€™s FREE 60-Day Study Guide and reach your target score in 2 months! ### GMAT/MBA Expert Elite Legendary Member Joined 23 Jun 2013 Posted: 10197 messages Followed by: 494 members Upvotes: 2867 GMAT Score: 800 Hi Shikatokika, Are you working with practice materials that are asking you to perform that type of calculation? Since the GMAT will NOT ask you to do that type of work, you might be using materials that aren't appropriate for. There are plenty of quality resources to be found though, so you might want to consider your options. GMAT assassins aren't born, they're made, Rich _________________ Contact Rich at Rich.C@empowergmat.com ### GMAT/MBA Expert Legendary Member Joined 14 Jan 2015 Posted: 2667 messages Followed by: 122 members Upvotes: 1153 GMAT Score: 770 _________________ Veritas Prep | GMAT Instructor Veritas Prep Reviews Save$100 off any live Veritas Prep GMAT Course

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It is true that the other one I got it from one of the online problem solving, and not from the OG, however here is the question that got me confused
OG16 - PS104

Leona bought a 1 yr, $10,000 certificate of deposit that paid interest at an annual rate of 8% compounded semiannually What was the total amount of interest paid on this certificate at maturity A$10,464
B $864 C$816
D $800 E$480

So the answer was 10,000 (1+ 0.08/2) ^ 2x1
which will be 10,000 (1.04)^2

Is there a way to make such calculation easier?
By elimination we shall eliminate A, D, and E
But how to know whether it's B or C

### GMAT/MBA Expert

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Hi Shikatokika,

Instead of trying to solve this problem with one 'big' calculation, you would likely find it easier to just do it in 'pieces'

Since the interest is generated semi-annually, you'll calculate 4% interest after 6 months and then another 4% interest (on the new total) after then next 6 months:

Start: $10,000 6 months later:$10,000 + (.04)(10,000) = $10,400 12 months later:$10,400 + (.04)(10,400) = $10,816 The question asks for the total interest earned -->$816

GMAT assassins aren't born, they're made,
Rich

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Contact Rich at Rich.C@empowergmat.com

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