saswata4s wrote:

Gwen invested $10000 at 5% compounded annually. Cheng invested $5000 at 10% compounded annually. How much greater will the total interest earned on Cheng's investment be in two years?

(a) $0

(b) $25

(c) $50

(d) $100

(e) $200

Let’s determine the interest earned for Gwen:

Year 1:

10,000 x 0.05 = $500

Year 2:

10,500 x 0.05 = $525

Total interest earned in two years is 500 + 525 = $1,025.

Now for Cheng:

Year 1:

5,000 x 0.10 = $500

Year 2:

5,500 x 0.10 = 550

Total interest earned in two years is 500 + 550 = $1,050,

Thus, Cheng earned 1,050 - 1,025 = 25 dollars more than Gwen.

Answer: B

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