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GRE Prep Club Team Member
Joined: 20 Feb 2017
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An investor opened a money market account with a single deposit of $60
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12 Apr 2022, 04:13
12 Apr 2022, 04:13
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An investor opened a money market account with a single deposit of $6000 on Dec. 31, 2001. The interest earned on the account was calculated and reinvested quarterly. The compound interest for the first 3 quarters of 2002 was $125, $130, and $145, respectively. If the investor made no deposits or withdrawals during the year, approximately what annual rate of interest must the account earn for the 4th quarter in order for the total interest earned on the account for the year to be 10 percent of the initial deposit?
A. 3.1%
B. 9.3%
C. 10.0%
D. 10.5%
E. 12.5%
A. 3.1%
B. 9.3%
C. 10.0%
D. 10.5%
E. 12.5%
An investor opened a money market account with a single deposit of $60
[#permalink]
12 Apr 2022, 05:32
12 Apr 2022, 05:32
2
1 quarter: you earned 125 after investing 6.000
2 quarter: you earned 130 after investing 6.125
3 quarter: you earned 145 after investing 6.225
At the end of 3 quarter you have 6.400 (6.225 + 145) and you want to get 6.600 at the end of 4 quarter because of 10% of interest. Therefore, you should earn 200 after investing 6.400. In conclusion, 200/6400 = 0,03125 should be the rate for 4 quarter.
However, the question is about the annual rate; therefore (1,03125)^4 - 1 is 13,0982%
2 quarter: you earned 130 after investing 6.125
3 quarter: you earned 145 after investing 6.225
At the end of 3 quarter you have 6.400 (6.225 + 145) and you want to get 6.600 at the end of 4 quarter because of 10% of interest. Therefore, you should earn 200 after investing 6.400. In conclusion, 200/6400 = 0,03125 should be the rate for 4 quarter.
However, the question is about the annual rate; therefore (1,03125)^4 - 1 is 13,0982%
gmatclubot
An investor opened a money market account with a single deposit of $60 [#permalink]
12 Apr 2022, 05:32
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