If Joanie puts $\$500$ in a savings account that earns $10$ percent annual interest compounded semiannually, how muc

BREAKING: Target Test Prep releases Brand New 2026 On Demand GMAT prep course

Redeem

This topic has expert replies

Post new topic Post Reply

Previous Topic Next Topic

M7MBA: Moderator; Posts: 2058; Joined: Sun Oct 29, 2017 4:24 am; Thanked: 1 times; Followed by:5 members

If Joanie puts $\$500$ in a savings account that earns $10$ percent annual interest compounded semiannually, how muc

by M7MBA » Tue Oct 20, 2020 5:49 am

Timer

00:00

Your Answer

Global Stats

If Joanie puts $\$500$ in a savings account that earns $10$ percent annual interest compounded semiannually, how much money will be in the account after one year?

A) $\$51.25$
B) $\$510$
C) $\$550$
D) $\$551.25$
E) $\$565$

Answer: D

Source: Princeton Review

Quote

Source: Beat The GMAT — Problem Solving | Tue Oct 20, 2020 5:49 am

deloitte247: Legendary Member; Posts: 2214; Joined: Fri Mar 02, 2018 2:22 pm; Followed by:5 members

Re: If Joanie puts $\$500$ in a savings account that earns $10$ percent annual interest compounded semiannually, how

by deloitte247 » Sun Oct 25, 2020 7:39 am

For compound interest;
$$A=P\left(1+\frac{r}{n}\right)^{^{nt}}$$
Where A = final amount; P = initial principal; r = interest rate
n = no. of times interest compounded; t = no. of time period elapsed
P = $500
Since the money is compounded semi-annually,
r = 10 * 1/2 = 5%
t = 1*2 = 2
n = 1
$$A=500\left(1+\frac{5\%}{1}\right)^{^{1\cdot2}}$$
$$A=500\left(1+0.05\right)^{^2}$$
$$A=500\left(1.05\right)^{^2}$$
$$A=500\cdot1.05\cdot1.05=$551.25$$

Quote

GMAT/MBA Expert

Scott@TargetTestPrep: GMAT Instructor; Posts: 8086; Joined: Sat Apr 25, 2015 10:56 am; Location: Los Angeles, CA; Thanked: 43 times; Followed by:29 members

Re: If Joanie puts $\$500$ in a savings account that earns $10$ percent annual interest compounded semiannually, how

by Scott@TargetTestPrep » Sun Oct 25, 2020 1:46 pm

M7MBA wrote: ↑
Tue Oct 20, 2020 5:49 am
If Joanie puts $\$500$ in a savings account that earns $10$ percent annual interest compounded semiannually, how much money will be in the account after one year?

A) $\$51.25$
B) $\$510$
C) $\$550$
D) $\$551.25$
E) $\$565$

Answer: D

Solution:

We use the compound interest formula: A = P (1 + r/n) ^ nt, where P is $500, r = 0.10, n = 2 (because of semi-annual interest), and t = 1.

Thus, after one year, Joanie has:

500(1 + 0.1/2)^2 = 500(1.05)^2 = 500(1.1025) = $551.25

Answer: D

Scott Woodbury-Stewart
Founder and CEO
[email protected]

See why Target Test Prep is rated 5 out of 5 stars on BEAT the GMAT. Read our reviews

Quote

Post new topic Post Reply

• Page 1 of 1

If Joanie puts \(\$500\) in a savings account that earns \(10\) percent annual interest compounded semiannually, how muc