If $5,000,000 is the initial amount placed in an account tha

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Mike@Magoosh: GMAT Instructor; Posts: 768; Joined: Wed Dec 28, 2011 4:18 pmFollowed by: 140 members; Location: Berkeley, CA; Thanked: 387 times

by Mike@Magoosh » Thu Jan 30, 2014 1:40 pm

If $5,000,000 is the initial amount placed in an account that collects 7% annual interest, which of the following compounding rates would produce the largest total amount after two years?
(A) compounding annually
(B) compounding quarterly
(C) compounding monthly
(D) compounding daily
(E) All four of these would produce the same total

This is a very easy question IF you understand all the concepts related to compound interest. If you find this question easy, then great! If you find it puzzling, and would like a deeper explanation of the concepts of compound interest, then see:
https://magoosh.com/gmat/2014/compound-i ... -the-gmat/

Mike

Magoosh GMAT Instructor
https://gmat.magoosh.com/

Source: Beat The GMAT — Problem Solving | Thu Jan 30, 2014 1:40 pm

Bill@VeritasPrep: GMAT Instructor; Posts: 1248; Joined: Thu Mar 29, 2012 2:57 pmFollowed by: 192 members; Location: Everywhere; Thanked: 503 times; GMAT Score:780

by Bill@VeritasPrep » Sun Feb 02, 2014 2:34 pm

A great example, but I think I'm okay with $5 million in the bank and 7% interest with any of these compounding options

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