Bunuel wrote:

If $1000 is placed into account X, yielding 10% interest compounded annually and $1000 is placed into account Y using 10% simple annual interest, how much more will be in account X than in account Y at the end of 5 years?

A. $0

B. $100

C. $110.51

D. $133.31

E. $146.41

Approximate:

In 1st year, both interests will be the same at $100 each.

In 2nd year, CI will be $10 extra (10% interest on previous interest of $100)

In 3rd year, CI will be $21 extra (10% interest on previous interest of $100 + $110 = $210)

It's already obvious that the answer will be 110.51 (= 10 + 21 + approx (30 + a bit extra) + approx (40 + a bit extra)).

else calculate for last 2 years too.

In 4th year, CI will be $33 extra (10% interest on previous interest of $210 + $121 = $331)

In 5th year, CI will be $46 (10% interest on previous interest of $331 + $133 = $464)

Total extra = 10 + 21 + 33 + 46 = $110

_________________

[b]Karishma

Veritas Prep GMAT Instructor

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