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# Mr. Smythe places 10,000 in a savings account that earns 6

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Eternal Intern
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Mr. Smythe places 10,000 in a savings account that earns 6 [#permalink]

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30 Jul 2003, 18:02
This topic is locked. If you want to discuss this question please re-post it in the respective forum.

Mr. Smythe places 10,000 in a savings account that earns 6 percent simple annual interest. At the end of the year, he withdraws the interest that has accumulated during the year, and places it in a seperate account that earns 10 percent simple annual interest. What is in the account(s) at the end of the second year?

( 1) How can there be any in the first account if he withdraws it from the first?
( 2) the problem says nowhere to add back the 10,000.
Basically, it sucks!

VT
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Ride em cowboy

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Re: Help with Word Problem [#permalink]

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30 Jul 2003, 18:18
Curly05 wrote:
Mr. Smythe places 10,000 in a savings account that earns 6 percent simple annual interest. At the end of the year, he withdraws the interest that has accumulated during the year, and places it in a seperate account that earns 10 percent simple annual interest. What is in the account(s) at the end of the second year?

( 1) How can there be any in the first account if he withdraws it from the first?
( 2) the problem says nowhere to add back the 10,000.
Basically, it sucks!

VT

There is absolutely nothing wrong with or ambiguous in the way this problem is stated.
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AkamaiBrah
Former Senior Instructor, Manhattan GMAT and VeritasPrep
Vice President, Midtown NYC Investment Bank, Structured Finance IT
MFE, Haas School of Business, UC Berkeley, Class of 2005
MBA, Anderson School of Management, UCLA, Class of 1993

Eternal Intern
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30 Jul 2003, 18:45
Well, show me how they arrived at their reasoning, captain.
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Ride em cowboy

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31 Jul 2003, 05:24
Curly05 wrote:
Well, show me how they arrived at their reasoning, captain.

Curly, try and solve the problem - its pretty simple.

I get the total amount at the end of the second year as 10600 in first account and 660 in second account = total of 11260
Eternal Intern
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31 Jul 2003, 07:18
Mr. Smythe places 10,000 in a savings account that earns 6 percent simple annual interest. At the end of the year, he withdraws the interest that has accumulated during the year, and places it in a seperate account that earns 10 percent simple annual interest. What is in the account(s) at the end of the second year?
(1) How can there be any in the first account if he withdraws it from the first?
(2) the problem says nowhere to add back the 10,000.

there's NOTHING questionable here: simple and clear as 1+1=2

your question (1): he withdraws the interest ONLY
your question (2): the 10,000 STAYS in first account

Year#1:
10000 * .06 = 600 = interest during the year

Year#2:
10000 * .06 = 600 + 10000 = 10600 : amount in 1st account
600 * .10 = 60 + 600 = 660 : amount in 2nd account

If he withdraws the interest he earned during the first year, how can it stay in the first account, i.e.- 10,600?

This is Kap's problem; I doubt it ETS words it in this style.
VT
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31 Jul 2003, 08:57
curly - the problem is perfectly worded - you just missed "the catch". Yes, the $600 was taken out of the account at the end of year 1. HOWEVER, the account with$10K earns an ADDITIONAL \$600 in the 2nd year - the question asks how much money is in the accounts at the end of 2 years.
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