compound interest is interest that is compounded on the principal as well as on any interest earned. So
c = number of times compounded annually:
final balance = principal x (1 + (interest rate/c))^(time x c)
so,
final balance = 192 x (1 + (0.08/3))^(1 x 3) =~ 2597
final balance - initial balance = 2597 - 2400 = 197
.......
Now, THAT said.... If it were me, I'd look at this problem and simple find the simple interest (not compounded).
2400 * 0.08 = 192
I know the answer will be *slightly* more than that, because the it compounded interest for only a year at such rates will only give you only slightly more than the simple interest. And the answer choices are spread out far enough to guesstimate at this point in time. If the answer choices were closer to each other -- something like a) 192 b) 194 c) 197 d) 199 e) 200 -- than I'd be safe and use the formula above.
PS - gmatscore.com
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thumpin_termis
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