An initial investment of $10,000 was deposited in a bank

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An initial investment of $10,000 was deposited in a bank account one year ago, and additional deposits were made during the year. If no withdrawals were made, what was the total amount of interest earned on this account during the year?

(1) The additional deposits during the year totaled $5,000.
(2) The account earned interest at the annual rate of 6 percent compounded quarterly.

Answer: E
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BTGModeratorVI wrote:
Mon May 25, 2020 7:31 am
An initial investment of $10,000 was deposited in a bank account one year ago, and additional deposits were made during the year. If no withdrawals were made, what was the total amount of interest earned on this account during the year?

(1) The additional deposits during the year totaled $5,000.
(2) The account earned interest at the annual rate of 6 percent compounded quarterly.

Answer: E
Source: GMAT prep
Given: An initial investment of $10,000 was deposited in a bank account one year ago, and additional deposits were made during the year.

Target question: What was the total amount of interest earned on this account during the year?

Statement 1: The additional deposits during the year totaled $5,000.
Since we have no information about the interest rate, statement 1 is NOT SUFFICIENT

Statement 2: The account earned interest at the annual rate of 6 percent compounded quarterly.
Since we have no information about the additional deposits, statement 2 is NOT SUFFICIENT

Statements 1 and 2 combined
Even when we combine two statements, there is still no way to answer the target question with certainty, since we have no idea WHEN the additional $5000 was deposited.
Better understand why, let's say the original $10,000 was deposited on January 1, 2019
Now consider these two possible cases:

Case a: The additional $5000 was deposited on January 1, 2019.
In this case, 1 year's interest was collected on the original $10,000 AND 1 year's interest was collected on the additional $5000
So, the TOTAL interest = 6% of $15,000


Case b: The additional $5000 was deposited at 11:59 pm on December 31, 2019.
In this case, 1 year's interest was collected on the original $10,000 AND no interest was collected on the additional $5000
So, the TOTAL interest = 6% of $10,000

As we can see, the two different cases yield different values of the TOTAL interest
So, the combined statements are NOT SUFFICIENT

Answer: E

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Brent
Brent Hanneson - Creator of GMATPrepNow.com
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