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Faster method for OG 12th ED Q. 78 in PS?

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by amelia21 » Mon Mar 26, 2012 5:20 am
Hi,

Is anybody aware of a faster method for solving Q. 78 in the PS section in the OG ed 12?

This is the question:

Leona bought a 1-yr $10,000 certificate of deposit that paid interest at an annual rate of 8% compounded semianually. What was the total amount of interest paid on this certificate of deposit?

(A) $10464
(B) $ 864
(C)$ 816
(D)$ 800
(E)$ 480

Using the Compound interest formula is too time-consuming.
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by sam2304 » Mon Mar 26, 2012 5:48 am
Given the interest is compounded semi annually @ 8% so its 4% for every 6 months

For compound interest we consider interest as well while compounding the second time.

So 10000 $ for 6 months @ 4% will yield = 400$
Now the principal becomes 10400, again for 6 months @4% = 416 $

Total amount = 10400 + 416 = 10816

So total amount - initial amount will give us the total interest = 10816 - 10000 = 816

IMO C.

If you can remember calculating interest easily without formulas then you can go for this else the easiest way is to remember the formulas.
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by diebeatsthegmat » Mon Mar 26, 2012 5:52 am
amelia21 wrote:Hi,

Is anybody aware of a faster method for solving Q. 78 in the PS section in the OG ed 12?

This is the question:

Leona bought a 1-yr $10,000 certificate of deposit that paid interest at an annual rate of 8% compounded semianually. What was the total amount of interest paid on this certificate of deposit?

(A) $10464
(B) $ 864
(C)$ 816
(D)$ 800
(E)$ 480

Using the Compound interest formula is too time-consuming.
hi, normally i have never seen any math problem that has root of 3 or 4, so dont be so worry, it only has root of 2 like this one and you know its kinda simple if you know the formula
interest= moneyX(1+i%/2)^2
so it would be
interest=10000*(1+0.08/2)^2
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by GMATGuruNY » Mon Mar 26, 2012 7:17 am
amelia21 wrote:Hi,

Is anybody aware of a faster method for solving Q. 78 in the PS section in the OG ed 12?

This is the question:

Leona bought a 1-yr $10,000 certificate of deposit that paid interest at an annual rate of 8% compounded semianually. What was the total amount of interest paid on this certificate of deposit?

(A) $10464
(B) $ 864
(C)$ 816
(D)$ 800
(E)$ 480

Using the Compound interest formula is too time-consuming.
Since the interest is compounded only once, the compounded interest will be just a bit more than the simple interest.
Since .08(10,000) = 800, the correct answer will be just a bit more than 800.

The correct answer is C.
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