Bob

[ST]

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

Answer is 2

[dmateer25]

Fund A:

2000 * .12 = 240

Fund B:
1000 * .3 = 300
1300 * .30 = 390
1300 + 390 = 1690

or

1000*(1.3)^2 = 1690


Fund A – Fund B

2240 – 1690 = 550

[mike22629]

Fund A Starts at $2,000 and earns 20% interest

Value of Fund A after 2 years = 2,000(1+.12)= 2240

Fund B Starts at $1,000 and earns 30% compounded annually

Value of Fund B after 1 year = 1,000(1+.30)= 1300

Value of Fund B after 2 years = 1300(1+.3)= 1690

2240 - 1690 = 550

P.S.

Know compound interest formula

Principal(1+(Interest rate/Number of periods per year)^(# of periods per year * # of years)

= P(1+(I/N))^NT

N = 1 in this problem because it is compounded annually, but if it is compounded semi-annually, N = 2

[Scott@TargetTestPrep]

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