ST wrote:Bob invested $2000 in fund A and $1000 in fund B. Over the next two years, the money in Fund A earned a total interest of 12 percent for the two years combined and the money in fund B earned 30 percent annual interest compounded annually. Two years after bob made these investments. Bob's investment in fund A was worth how much more than his investment in fund B?
1. $500
2. $550
3. $600
4. $650
5. $700
We are given that Bob invested $2,000 in Fund A and $1,000 in Fund B, and that over the next two years, the money in Fund A earned a total interest of 12 percent for the two years combined, and the money in Fund B earned 30 percent annual interest compounded annually.
Thus, from Fund A, Bob earned 2,000 x 0.12 = 240 dollars in interest in two years. With interest, Fund A was worth 2,240 dollars after two years.
For the first year in Fund B, Bob’s investment of 1,000 dollars earned:
1,000 x 0.3 = 300 dollars in interest
For the second year, we need to add the interest earned from year 1 to the original investment of 1,000 dollars and then calculate 30 percent interest of 1,300 dollars:
1,300 x 0.3 = 390 dollars in interest
Thus, after two years, Bob’s investment in Fund B was worth 1,000 + 300 + 390 = 1,690 dollars.
So, we can determine that investment A was worth 2,240 - 1,690 = 550 dollars more than investment B.
Answer:
B
