Whats the calculation ?

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Whats the calculation ?

by candygal79 » Tue Mar 25, 2014 1:19 am
At the beginning of 1992, Maria's stock portfolio was worth $600,000. During 1992, the portfolio's value increased by 95%. During the next year, the portfolio increased its worth by only 5%. What was Maria's portfolio worth, in dollars, by the end of 1993?


1,180,000
1,200,000
1,200,300
1,228,500
1,330,000

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by GMATGuruNY » Tue Mar 25, 2014 5:47 am
candygal79 wrote:At the beginning of 1992, Maria's stock portfolio was worth $600,000. During 1992, the portfolio's value increased by 95%. During the next year, the portfolio increased its worth by only 5%. What was Maria's portfolio worth, in dollars, by the end of 1993?


1,180,000
1,200,000
1,200,300
1,228,500
1,330,000
The first percentage -- 95% -- applies only to the principal of $600,000:
Since 5% of 600,000 = 30,000, 95% = 600,000 - 30,000 = 570,000.

The second percentage -- 5% -- applies both to the principal AND to the $570,000 in interest earned above:
5% of 600,000 = 30,000.
5% of 570,000 = 23,500.

Final total:
600,000 + 570,000 + 30,000 + 23,500.
The correct answer must end in 500.

The correct answer is D.
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