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Directions: Read the information presented in Two-Part Analysis Question below and then select two answers from the choices below. 
Clearwater State Bank is offering an introductory 20% interest rate on a new account, which will compound semi-annually for the first two years, then compound 5% annually thereafter. Customer 1 deposits $100 in that account to start. To compete, Clearwater Credit Union is offering a similar offer. Their newest account offers an introductory rate of 15% compounded quarterly for the first year, and a rate of 6% compounded quarterly thereafter. Customer 2 deposits an unknown amount with Clearwater Credit Union. After two years, the customers had an equal amount saved.
Q. From the choices below, identify the amount Customer 1 will have in Clearwater State Bank after one year, and the amount Customer 1 will have after 21 months if he moves his balance at the end of the first year to Clearwater Credit Union. Make two selections.
  • a)
    121
  • b)
    135
  • c)
    168
  • d)
    186
  • e)
    220
Correct answer is option 'A,B'. Can you explain this answer?
Most Upvoted Answer
Directions: Read the information presented in Two-Part Analysis Questi...
Question 4 Explanation: The correct answers are 121 and 135. Customer 1 is placing $100 in Clearwater State Bank for one year only, so it will compound twice at 10%. Remember that 20% interest compounded semi-annually is the same as 10% interest compounded every six months. That will give the customer $100 x 1.1 = $110 after six months, and $110 x 1.1 = $121 after one year. Customer 1 then takes that $121 and places it in the Clearwater Credit Union for the remaining 9 months out of the 21 months total (12 months was the first year at the Clearwater State Bank). At Clearwater Credit Unit, the $121 will compound 4 times at 3.75% every quarter. After three months that will be $121 * 1.0375 = $125.54. After six months that will be $125.54 * 1.0375 = $130.25. After nine months that will be approximately $135.13, or $135.
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Directions: Read the information presented in Two-Part Analysis Questi...
Calculating Customer 1's Amount After One Year
- Customer 1 starts with $100 at Clearwater State Bank with a 20% interest rate, compounded semi-annually for the first two years.
- For the first year, the formula for compound interest is:
Amount = Principal * (1 + (rate/n))^(nt)
Where:
- Principal = $100
- Rate = 20% or 0.20
- n = number of times interest is compounded per year (2 for semi-annual)
- t = time in years (1 year)
- Plugging in the values:
Amount = 100 * (1 + (0.20/2))^(2*1)
Amount = 100 * (1 + 0.10)^2
Amount = 100 * (1.10)^2
Amount = 100 * 1.21
Amount = $121
Calculating Customer 1's Amount After 21 Months
- At the end of the first year, Customer 1 has $121. He then moves this amount to Clearwater Credit Union, which offers a 15% interest rate compounded quarterly for the next 9 months.
- For 9 months (which is 0.75 years), the formula for compound interest is used again:
Amount = Principal * (1 + (rate/n))^(nt)
- Here:
- Principal = $121
- Rate = 15% or 0.15
- n = 4 (quarterly)
- t = 0.75 years
- Plugging in the values:
Amount = 121 * (1 + (0.15/4))^(4*0.75)
Amount = 121 * (1 + 0.0375)^(3)
Amount = 121 * (1.0375)^3
Amount = 121 * 1.1162 (approximately)
Amount = $135.
Final Summary
- After one year, Customer 1 has $121 in Clearwater State Bank.
- After 21 months (1 year + 9 months), Customer 1 has approximately $135 after moving his balance to Clearwater Credit Union.
Thus, the correct answers are options a) 121 and b) 135.
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Directions: Read the information presented in Two-Part Analysis Question below and then select two answers from the choices below.Clearwater State Bank is offering an introductory 20% interest rate on a new account, which will compound semi-annually for the first two years, then compound 5% annually thereafter. Customer 1 deposits $100 in that account to start. To compete, Clearwater Credit Union is offering a similar offer. Their newest account offers an introductory rate of 15% compounded quarterly for the first year, and a rate of 6% compounded quarterly thereafter. Customer 2 deposits an unknown amount with Clearwater Credit Union. After two years, the customers had an equal amount saved.Q. From the choices below, identify the amount Customer 1 will have in Clearwater State Bank after one year, and the amount Customer 1 will have after 21 months if he moves his balance at the end of the first year to Clearwater Credit Union. Make two selections.a)121b)135c)168d)186e)220Correct answer is option 'A,B'. Can you explain this answer?
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Directions: Read the information presented in Two-Part Analysis Question below and then select two answers from the choices below.Clearwater State Bank is offering an introductory 20% interest rate on a new account, which will compound semi-annually for the first two years, then compound 5% annually thereafter. Customer 1 deposits $100 in that account to start. To compete, Clearwater Credit Union is offering a similar offer. Their newest account offers an introductory rate of 15% compounded quarterly for the first year, and a rate of 6% compounded quarterly thereafter. Customer 2 deposits an unknown amount with Clearwater Credit Union. After two years, the customers had an equal amount saved.Q. From the choices below, identify the amount Customer 1 will have in Clearwater State Bank after one year, and the amount Customer 1 will have after 21 months if he moves his balance at the end of the first year to Clearwater Credit Union. Make two selections.a)121b)135c)168d)186e)220Correct answer is option 'A,B'. Can you explain this answer? for GMAT 2024 is part of GMAT preparation. The Question and answers have been prepared according to the GMAT exam syllabus. Information about Directions: Read the information presented in Two-Part Analysis Question below and then select two answers from the choices below.Clearwater State Bank is offering an introductory 20% interest rate on a new account, which will compound semi-annually for the first two years, then compound 5% annually thereafter. Customer 1 deposits $100 in that account to start. To compete, Clearwater Credit Union is offering a similar offer. Their newest account offers an introductory rate of 15% compounded quarterly for the first year, and a rate of 6% compounded quarterly thereafter. Customer 2 deposits an unknown amount with Clearwater Credit Union. After two years, the customers had an equal amount saved.Q. From the choices below, identify the amount Customer 1 will have in Clearwater State Bank after one year, and the amount Customer 1 will have after 21 months if he moves his balance at the end of the first year to Clearwater Credit Union. Make two selections.a)121b)135c)168d)186e)220Correct answer is option 'A,B'. Can you explain this answer? covers all topics & solutions for GMAT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Directions: Read the information presented in Two-Part Analysis Question below and then select two answers from the choices below.Clearwater State Bank is offering an introductory 20% interest rate on a new account, which will compound semi-annually for the first two years, then compound 5% annually thereafter. Customer 1 deposits $100 in that account to start. To compete, Clearwater Credit Union is offering a similar offer. Their newest account offers an introductory rate of 15% compounded quarterly for the first year, and a rate of 6% compounded quarterly thereafter. Customer 2 deposits an unknown amount with Clearwater Credit Union. After two years, the customers had an equal amount saved.Q. From the choices below, identify the amount Customer 1 will have in Clearwater State Bank after one year, and the amount Customer 1 will have after 21 months if he moves his balance at the end of the first year to Clearwater Credit Union. Make two selections.a)121b)135c)168d)186e)220Correct answer is option 'A,B'. Can you explain this answer?.
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