https://prepswift.gregmat.com/quizzes/quiz/prepswift-compound-interest-ii (Question 2)
Isn’t the wording in such cases too vague? It says “10% interest compounded semi-annually”, which seems to most clearly mean compounded twice a year, 10% each period. If the problem wants to say 5% per period for 10% total annually, as the solution suggests, the correct language should be “10% annual interest compounded semi-annually”. Isn’t that so? In the PrepSwift Explanation that is what was written.
Not quite. The approach used in the solution is correct.
Refer to Compound Interest II - PrepSwift . Greg explains.
Right but in such examples, he clearly states the total interest per year as “annual”. For instance, he writes “earning 12% annual interest, compounding monthly”. The 12% interest is specificed as being annual, and then the information that it is compounded monthly is what informs me that it is 1% per month. I’m really not trying to be nitpicky here, but I just want to know exactly what kind of terminology I can expect on these kinds of questions on the actual GRE, that’s all.