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100 points for $49 worth of Veritas practice GMATs FREE VERITAS PRACTICE GMAT EXAMS Earn 10 Points Per Post Earn 10 Points Per Thanks Earn 10 Points Per Upvote ## Today Joelle opened an interest-bearing savings account... tagged by: BTGmoderatorLU ##### This topic has 1 expert reply and 0 member replies ### Top Member ## Today Joelle opened an interest-bearing savings account... Today Joelle opened an interest-bearing savings account and deposited$6,000. If the annual interest rate is 4 percent compounded interest, and she neither deposits nor withdraws money for exactly 2 years, how much money will she has in the account?

A. $6,048.00 B.$6,240.00
C. $6,450.00 D.$6,480.00
E. $6,489.60 The OA is E. I'm really confused with this PS question. Experts, any suggestion about how can I solve it? Thanks in advance. ### GMAT/MBA Expert Legendary Member Joined 14 Jan 2015 Posted: 2667 messages Followed by: 122 members Upvotes: 1153 GMAT Score: 770 Top Reply LUANDATO wrote: Today Joelle opened an interest-bearing savings account and deposited$6,000. If the annual interest rate is 4 percent compounded interest, and she neither deposits nor withdraws money for exactly 2 years, how much money will she has in the account?

A. $6,048.00 B.$6,240.00
C. $6,450.00 D.$6,480.00
E. $6,489.60 The OA is E. I'm really confused with this PS question. Experts, any suggestion about how can I solve it? Thanks in advance. First, you could so the actual math. During the first year, Joelle will generate 4% interest on$6000. 4% of 6000 = 240. Her total investment at this point = 6240.

During the second year, Joelle will generate 4% interest on $6240. 4% of 6240 = 249.60. Her total investment at this point = 6240 + 249.60 = 6489.60. The answer is E Of course, there's no need to do that. If you know that compound interest will always yield more interest than simple interest, it's enough to see that with simply interest, Joelle will earn$240 each year, for a total of 480, giving her 6000 + 480 = 6480. If we know that compound interest will yield a greater value, only E will work.

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