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# If $1,000 is deposited in a certain bank account and remains  Question banks Downloads My Bookmarks Reviews Author Message TAGS: Intern Joined: 19 Oct 2009 Posts: 48 Followers: 0 Kudos [?]: 5 [0], given: 4 If$1,000 is deposited in a certain bank account and remains [#permalink]  13 Nov 2009, 15:45
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44% (01:38) correct 55% (01:15) wrong based on 2 sessions
If $1,000 is deposited in a certain bank account and remains in the account along with any accumulated interest, the dollar amount of interest, I, earned by the deposit in the first n years is given by the formula I = 1000 * ((1 + r/100)^n - 1), where r percent is the annual interest rate paid by the bank. Is the annual interest rate paid by the bank greater than 8 percent? 1) The deposit earns a total of$210 in interest in the first two years.
2) (1 + r/100)^2 > 1.15

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If I = 1000*[(1+\frac{r}{100})^n - 1)], is r > 8%?

Essentially, you have 3 unknowns (I, r, and n), and you need to solve for r.

Statement 1: The deposit earns a total of $210 in interest in the first two years. You are given I ($210) and n (2), and therefore can solve for r. Sufficient. If you want to actually solve for this, you can do so, but there really is no need for it.

Statement 2: (1 + \frac{r}{100})^2 > 1.15.

This is a bit more tricky. The above formula can be rearranged to the following:

1 + \frac{r}{100} > \sqrt{1.15}

Now assuming we don't have a calculator handy, you can mentally approximate this (erring on the side of being conservative) as:

r > 7.5% (It's actually less than this, but being conservative is fine)

We can make this approximation safely because, simply put, if r > 0, than (1+r)^2 = 1 + 2r + r^2 will always be greater than (1 + 2r).

Since we need to know if r > 8%, this is insufficient.
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Note that this is a YES/NO DS question. So finding the solution regardless of whether it is YES or NO is sufficient.

Statement 1

We are given both the value of I and the value of n. That is two out of the three variables in the formula given above. No further calculation is necessary. Again, because this is a YES/NO question, even if the value is less than 8 percent, you can still answer the question.

SUFFICIENT

Statement 2

Because the statement given is an inequality, we must solve the equation to determine whether it is sufficient. If the r given in the statement is greater than a value less than 8%, then we don't if that specific value of r is greater than or less than 8%.

(1+r/100)>(1.15)^(1/2)
1+r/100>1.07
r>.07

NOT SUFFICIENT

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compound interest [#permalink]  13 Mar 2010, 01:09
if $1,000 is deposited in a certain bank account and remains in the account along with any accrued interest, the dollar amount of interest, I, earned by deposit in the first n years is given by: I = 1,000 ((1+r/100)^n -1) where r percent is the annual interest rate paid by the bank. Is the annual interest rate paid by the bank > 8%? 1) the deposit earns a total of$210 in interest in the first 2 years.

2) (1+r/100)^2 > 1.15
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Re: compound interest [#permalink]  13 Mar 2010, 02:57
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mustdoit wrote:
if $1,000 is deposited in a certain bank account and remains in the account along with any accrued interest, the dollar amount of interest, I, earned by deposit in the first n years is given by: I = 1,000 ((1+r/100)^n -1) where r percent is the annual interest rate paid by the bank. Is the annual interest rate paid by the bank > 8%? 1) the deposit earns a total of$210 in interest in the first 2 years.

2) (1+r/100)^2 > 1.15

In other words we're asked whether r>8.
Stat. 1: the deposit earns a total of $210 in interest in the first 2 years. I replaced the "I" and "n" with the numbers from stat. 1: 210=(1+\frac{r}{100})^{2-1} - from this we can get "r" - sufficient. Stat. 2: (1+\frac{r}{100})^2>1.15 => 1+\frac{r}{100}>\sqrt{1.15} => r>(\sqrt{1.15}-1)*100 => r>(\approx1.07-1)*100 => r>7 - not sufficient So, the answer is A. Senior Manager Joined: 13 Dec 2009 Posts: 269 Followers: 8 Kudos [?]: 67 [0], given: 13 Re: compound interest [#permalink] 16 Mar 2010, 10:31 [quote="Igor010"] Stat. 1: the deposit earns a total of$210 in interest in the first 2 years.
I replaced the "I" and "n" with the numbers from stat. 1:
210=(1+\frac{r}{100})^{2-1} - from this we can get "r" - sufficient.

[quote]

Isn't in statement 1 we do not have principle on which this interest was calculated. How can we assume it will be 1 only?
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Re: compound interest [#permalink]  16 Mar 2010, 10:57
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sidhu4u wrote:
Igor010 wrote:
Stat. 1: the deposit earns a total of $210 in interest in the first 2 years. I replaced the "I" and "n" with the numbers from stat. 1: 210=(1+\frac{r}{100})^{2-1} - from this we can get "r" - sufficient. Quote: Isn't in statement 1 we do not have principle on which this interest was calculated. How can we assume it will be 1 only? Sorry, don't understand your q. We have I=1000*(1+\frac{r}{100})^{n-1} as given and statement 1 gives us some figures to use in this formula... Intern Joined: 16 Mar 2010 Posts: 1 Followers: 0 Kudos [?]: 0 [0], given: 4 Re: compound interest [#permalink] 16 Mar 2010, 12:22 Quote: if$1,000 is deposited in a certain bank account and remains in the account along with any accrued interest, the dollar amount of interest, I, earned by deposit in the first n years is given by:

I = 1,000 ((1+r/100)^n -1)

where r percent is the annual interest rate paid by the bank. Is the annual interest rate paid by the bank > 8%?

1) the deposit earns a total of $210 in interest in the first 2 years. 2) (1+r/100)^2 > 1.15 A quick look suggests both statements are correct unless you calculate interest rate in each case. Since statement 1 one will give a concrete value of r no need to calculate it, it's sufficient. BUT statement 2 needs calculation of r since r>1 or r>2 etc. these types of answers are not sufficient. r > 7.2%, not sufficient. Manager Joined: 18 Feb 2010 Posts: 174 Schools: ISB Followers: 3 Kudos [?]: 80 [1] , given: 0 Re: compound interest [#permalink] 18 Mar 2010, 22:27 1 This post received KUDOS Igor010 wrote: mustdoit wrote: if$1,000 is deposited in a certain bank account and remains in the account along with any accrued interest, the dollar amount of interest, I, earned by deposit in the first n years is given by:

I = 1,000 ((1+r/100)^n -1)

where r percent is the annual interest rate paid by the bank. Is the annual interest rate paid by the bank > 8%?

1) the deposit earns a total of $210 in interest in the first 2 years. 2) (1+r/100)^2 > 1.15 In other words we're asked whether r>8. Stat. 1: the deposit earns a total of$210 in interest in the first 2 years.
I replaced the "I" and "n" with the numbers from stat. 1:
210=(1+\frac{r}{100})^{2-1} - from this we can get "r" - sufficient.

Stat. 2: (1+\frac{r}{100})^2>1.15 => 1+\frac{r}{100}>\sqrt{1.15} =>
r>(\sqrt{1.15}-1)*100 => r>(\approx1.07-1)*100 => r>7 - not sufficient

Statement 1 is pretty easy to evaluate and you can get the answer...

About statement 2 we can do this way as well....

given (1+\frac{r}{100})^2>1.15

this means we have received a interest greater than 15% ( 1+ .15) for 2 years. That could be 7.5 for each year (approx) or 10% for each year if the 1.15 figure becomes 1.21. Obviously we cannot confirm any value of R.

What do you say...??
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DS [#permalink]  10 May 2010, 17:40
29.If $1000 is deposited in a certain bank account and remains in the account along with any accumulated intrest, the dollar amount of intrest, I, earned by the deposit in the first n years is given by the formula I= 1000((1 + r/100)^n – 1), where r percent is the annual interest rate paid by the bank. Is the annual rate paid by the bank greater than 8 percent? 1.The deposit earns a total of$210 in interest in the first teo years.
2.(1 + r/100)^2 > 1.15

Thanks
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Second option does not give a precise value of r as the one given by option one.
Thus A is the option that holds true.
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Re: If $1,000 is deposited in a certain bank account and remains [#permalink] 18 Jan 2012, 08:52 I calculated A too. But OA is given D. In option 2 r>7. Help please. _________________ I am student of everyone-baten Collections:- PSof OG solved by GC members: http://gmatclub.com/forum/collection-ps-with-solution-from-gmatclub-110005.html DS of OG solved by GC members: http://gmatclub.com/forum/collection-ds-with-solution-from-gmatclub-110004.html 100 GMAT PREP Quantitative collection http://gmatclub.com/forum/gmat-prep-problem-collections-114358.html Collections of work/rate problems with solutions http://gmatclub.com/forum/collections-of-work-rate-problem-with-solutions-118919.html Mixture problems in a file with best solutions: http://gmatclub.com/forum/mixture-problems-with-best-and-easy-solutions-all-together-124644.html GMAT Club team member Joined: 02 Sep 2009 Posts: 11534 Followers: 1795 Kudos [?]: 9559 [3] , given: 826 Re: If$1,000 is deposited in a certain bank account and remains [#permalink]  18 Jan 2012, 08:59
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Baten80 wrote:
I calculated A too. But OA is given D.
In option 2 r>7.

Answer is A. Discussed here: annual-interest-104084.html

If $1,000 is deposited in a certain bank account and remains in the account along with any accumulated interest, the dollar amount of interest, I, earned by the deposit in the first n years is given by the formula I=1,000((1+r/100)^n-1), where r percent is the annual interest rate paid by the bank. Is the annual interest rate paid by the bank greater than 8 percent? Given: I=1,000((1+\frac{r}{100})^n-1). Question: is r>8. (1) The deposit earns a total of$210 in interest in the first two years --> I=210 and n=2 --> 210=1,000((1+\frac{r}{100})^2-1) --> note that we are left with only one unknown in this equation, r, and we'll be able to solve for it and say whether it's more than 8, so even withput actual solving we can say that this statement is sufficient.

(2) (1 + r/100 )^2 > 1.15 --> if r=8 then (1+\frac{r}{100})^2=(1+\frac{8}{100})^2=1.08^2\approx{1.16}>1.15 so, if r is slightly less than 8 (for example 7.99999), (1+\frac{r}{100})^2 will still be more than 1.15. So, this statement is not sufficient to say whether r>8.

This topics is locked, so in case of any question please post it here: annual-interest-104084.html

Hope it helps.
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Re: If $1,000 is deposited in a certain bank account and remains [#permalink] 18 Jan 2012, 08:59 Similar topics Replies Last post Similar Topics: If$1000 is deposited in a bank account and remains in the 3 01 Aug 2006, 09:49
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