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# Bob invested \$2000 in fund A and \$1000 in fund B. Over the next two ye

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Re: Bob invested \$2000 in fund A and \$1000 in fund B. Over the next two ye [#permalink]
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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

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.

Originally posted by ScottTargetTestPrep on 18 Jan 2018, 14:15.
Last edited by ScottTargetTestPrep on 16 Oct 2018, 18:30, edited 2 times in total.
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Re: Bob invested \$2000 in fund A and \$1000 in fund B. Over the next two ye [#permalink]
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Re: Bob invested \$2000 in fund A and \$1000 in fund B. Over the next two ye [#permalink]
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