Compounded Interest

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money9111: Legendary Member; Posts: 2109; Joined: Sun Apr 19, 2009 10:25 pm; Location: New Jersey; Thanked: 109 times; Followed by:79 members; GMAT Score:640

Compounded Interest

by money9111 » Sat Feb 06, 2010 4:47 pm

Lori deposits $100 in a savings account at 2% interest, compounded annually. After 3 years, what is the balance on the account? (assume Lori makes no withdrawals or deposits.)

I know how to figure this out... but can someone show me how to do this the quickest way?

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Source: Beat The GMAT — Problem Solving | Sat Feb 06, 2010 4:47 pm

Osirus@VeritasPrep: GMAT Instructor; Posts: 1578; Joined: Thu May 28, 2009 8:02 am; Thanked: 128 times; Followed by:34 members; GMAT Score:760

by Osirus@VeritasPrep » Sat Feb 06, 2010 6:16 pm

You have to multiply 100 by 1.02. multipy 102 by 1.02. multiply 104.12 by 1.02 and you have your answer. That's the only way to do it.

The sad thing is, I didn't do any of those calculations. I've drilled that stuff so often I remember the exact values...lol.

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sadullaevd: Senior | Next Rank: 100 Posts; Posts: 81; Joined: Wed Apr 08, 2009 3:12 pm; Location: South Korea; Thanked: 4 times

by sadullaevd » Sat Feb 06, 2010 6:59 pm

osirus0830 wrote:You have to multiply 100 by 1.02. multipy 102 by 1.02. multiply 104.12 by 1.02 and you have your answer. That's the only way to do it.

The sad thing is, I didn't do any of those calculations. I've drilled that stuff so often I remember the exact values...lol.

Shouldn't that be 104.04? Or am i missing any calculation?

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Osirus@VeritasPrep: GMAT Instructor; Posts: 1578; Joined: Thu May 28, 2009 8:02 am; Thanked: 128 times; Followed by:34 members; GMAT Score:760

by Osirus@VeritasPrep » Sat Feb 06, 2010 6:59 pm

sadullaevd wrote:
osirus0830 wrote:You have to multiply 100 by 1.02. multipy 102 by 1.02. multiply 104.12 by 1.02 and you have your answer. That's the only way to do it.

The sad thing is, I didn't do any of those calculations. I've drilled that stuff so often I remember the exact values...lol.

Shouldn't that be 104.04? Or am i missing any calculation?

yeah you're right

its 104.04 and the final answer is 106.12

https://www.beatthegmat.com/the-retake-o ... 51414.html

Brandon Dorsey
GMAT Instructor
Veritas Prep

Buy any Veritas Prep book(s) and receive access to 5 Practice Cats for free! Learn More.

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Stuart@KaplanGMAT: GMAT Instructor; Posts: 3225; Joined: Tue Jan 08, 2008 2:40 pm; Location: Toronto; Thanked: 1710 times; Followed by:614 members; GMAT Score:800

by Stuart@KaplanGMAT » Sat Feb 06, 2010 8:19 pm

money9111 wrote:Lori deposits $100 in a savings account at 2% interest, compounded annually. After 3 years, what is the balance on the account? (assume Lori makes no withdrawals or deposits.)

I know how to figure this out... but can someone show me how to do this the quickest way?

On the GMAT, the answer would almost certainly be (1.02)^3, rather than in expanded form. One thing we're almost never required to do on the actual test is the type of multiplication or division that we'd just plug into a calculator (or computer, or accounting department) in real life.

Compound interest questions on the GMAT test our knowledge of the formula, not the arithmetic.