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by gbb » Wed Apr 01, 2009 6:43 pm
An investor opened a money market account with a single deposit of $6,000 on December 31, 2001. The interest earned on the account was calculated and reinvested quarterly. The compounded interest reported for the first three quarters o 2002 ws $125, $130, and $145, respectively. If the investor made no deposits o withdrawals during the year, approximately what annual rate of interes must the account earn for the fourth quarter in order for the total interest earned on the account for the year to be 10 percent of the initial deposit?

A 3.1%
B 9.3%
C 10.0%
D 10.5%
E 12.5%

answer E
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Source: — Problem Solving |

by BlueDragon2010 » Wed Apr 01, 2009 11:53 pm
Questions like this make me wish I could bring a calculator into the test :-( I bet you had a high quant score on this test
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by scoobydooby » Thu Apr 02, 2009 3:38 am
the question only asks for an approximate rate.
compound interest is slightly more than simple interest.

total interest earned for the year at 10% simple interest: 6000*10%=600
total for the 1st 3 qtrs: 125+130+145=400
=> interest for the 4th qtr: 600-400=200

to find the rate for the 4th qtr:
200=6000*(r/100)*3/12
=> r=40/3=12.33% ~closest to 12.50%

hence E
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by Nailya » Thu Apr 02, 2009 9:14 am
scoobydooby, you rock!
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