Problem Solving

AAPL wrote:GMAT Prep

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?

A. $500
B. $550
C. $600
D. $650
E. $700

OA B.

Note that Fund A earned a total interest of 12 percent for the two years combined; it means that the total interest for two years = 2000*12% = $240. You need not take the number of years (2 years) into consideration!

Amount received for fund B after 2 years = 1000*(1 + 30%)^2 = 1000*(1.30^ = 1000*1.68 = $1690.

Amount receive from fund A is greater than from fund B is more by 2000 - 1690 = $550.

The correct answer: B

Hope this helps!

-Jay
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AAPL wrote:GMAT Prep

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?

A. $500
B. $550
C. $600
D. $650
E. $700

The interest earned in fund A was 2,000 x 0.12= 240 dollars, bringing his total investment in fund A to 2,240 dollars.

Using the formula for compound interest, the final value of investment B after 2 years was:

Final value = 1,000(1 + 0.3)^2

Final value = 1,000(1.3)^2

Final Value = 1,000(1.69) = 1,690

Thus, fund A was worth 2,240 - 1,690 = 550 dollars more than fund B.

Answer: B