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How much more interest will maria receive if she invests 1000$ for one

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EMPOWERgmat Instructor
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Status: GMAT Assassin/Co-Founder
Affiliations: EMPOWERgmat
Joined: 19 Dec 2014
Posts: 12205
Location: United States (CA)
GMAT 1: 800 Q51 V49
GRE 1: Q170 V170
Re: How much more interest will maria receive if she invests 1000$ for one  [#permalink]

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New post 27 Jan 2018, 13:48
Hi All,

This question requires knowledge of the formulas for Simple Interest and Compound Interest:

Simple Interest = Principal x (1 + RT)
Compound Interest = Principal x (1 + R)^T

Where R is the yearly interest rate and T is the number of years. When compounding MORE than once a year, you must divide R by the number of periods and multiply T by the same number of periods.

We're asked for the DIFFERENCE in the amount of interest that is generated under two different situations. We can TEST VALUES to answer this question. IF... X = 20...

$1,000 at 20% compounded semi-annually (meaning twice a year) =

$1,000 x (1.1)^2 =
$1,000 x (1.21) = $1210

$1,000 at 10% compounded annually =

$1,000 x (1.2)^1 =
$1200

The difference is $10, so we're looking for an answer that equals 10 when we plug X=20 into it. There's only one answer that matches....

Final Answer:

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Re: How much more interest will maria receive if she invests 1000$ for one &nbs [#permalink] 27 Jan 2018, 13:48

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