Hi All,
We're told that Barbara invests $2400 in the National Bank at 5%. We're asked how much additional money she must invest at 8% so that the TOTAL annual income will be equal to 6% of her TOTAL investment. This question can be solved in a couple of different ways, including by TESTing THE ANSWERS.
To start, the $2400 invested at 5% would earn ($2400)(.05) = $120.
Since Barbara invested $2400 at 5%, IF she were to invest another $2400 at 7%, then the average return for the total investment would be exactly 6% (since the EQUAL investments at 5% and 7% would 'average out' to 6%. Here though, she's investing money at 8% - which means that she would NOT need $2400 invested there (she would need LESS than that, since the investment is at a higher rate). Thus, the answers are narrowed down to either $1000 or $1200.
Let's TEST Answer A = $1200
IF... $1200 were invested at 8%, then
that investments would earn (1200)(.08) = $96
the total money invested would equal $2400 + $1200 = $3600
the total return on the investment would be $120 + $96 = $216
1% of $3600 = $36
6% of $3600 = $216
This is an exact match for what we were told, so this MUST be the answer.
Final Answer: A
GMAT assassins aren't born, they're made,
Rich
