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Gwen invested $10000 at 5% compounded annually

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Gwen invested $10000 at 5% compounded annually  [#permalink]

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New post 20 Nov 2017, 05:30
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A
B
C
D
E

Difficulty:

  15% (low)

Question Stats:

82% (02:01) correct 18% (01:43) wrong based on 32 sessions

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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

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Re: Gwen invested $10000 at 5% compounded annually  [#permalink]

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New post 20 Nov 2017, 05:40
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


First Sum = $10000 at 5% compounded annually

First sum after 2 years = (1.05)*(1.05)*10000 = $11025

Total Interest Earned = 11025 - 10000 = $1025



Second Sum = $10000 at 5% compounded annually

Second sum after 2 years = (1.10)*(1.10)*5000 = $6050

Total Interest Earned = 6050 - 5000 = $1050


Difference = 1050-1025 = $25

Answer: Option B
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Re: Gwen invested $10000 at 5% compounded annually  [#permalink]

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New post 20 Nov 2017, 05:48
10,000*5/100=500 Year 1
10,500*5/100=525 Year 2
Total interest= 1025

5000*10/100=500 Year 1
5500*10/100=550 Year 2
Total interest=1050

Hence difference in interest is 25$.


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Re: Gwen invested $10000 at 5% compounded annually  [#permalink]

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New post 22 Nov 2017, 12:11
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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Re: Gwen invested $10000 at 5% compounded annually &nbs [#permalink] 22 Nov 2017, 12:11
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