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Updated on: 29 Oct 2018, 23:27
Originally posted by EgmatQuantExpert on 09 Oct 2018, 04:09.
Last edited by EgmatQuantExpert on 29 Oct 2018, 23:27, edited 1 time in total.
Last edited by EgmatQuantExpert on 29 Oct 2018, 23:27, edited 1 time in total.
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B
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Question Stats:
75% (02:04) correct
25%
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James invested $ 5000 in scheme A for 1 year at a simple annual interest rate of 5% and invested another $10000 in scheme B for one year at an annual interest rate of 10% compounded semi-annually. What is the positive difference between the interest earned by James from scheme A and scheme B?
To read all our articles:Must read articles to reach Q51
- A. $250
B. $775
C. $1025
D. $1750
E. $2000
To read all our articles:Must read articles to reach Q51
09 Oct 2018, 05:10
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EgmatQuantExpert
Plan A interest: 5000*0.05= 250
Plan B interest: 10000*0.05=500 (for 1st 6 month)
And 10500*0.05=525( for next 6 months)
Positive difference =775
Answer:B
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09 Oct 2018, 10:03
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EgmatQuantExpert
Scheme A
Interest = 5% of $5,000 = $250
Scheme B
10% interest compounded semi-annually means that the interest is compounded 2 times (in 1 year) at a rate of 5% each time
One option is to apply the compound interest formula, but since we're only compounding the interest twice, it may be faster to just perform those 2 calculations.
After 6 months, the interest = 5% of $10,000 = $500
So, the value of the investment = $10,000 + $500 = $10,500
After 12 months, the interest = 5% of $10,500 = $525
So, the value of the investment = $10,500 + $525= $11,025
So, the accumulated interest = $11,025 - $10,000 = $1,025
What is the positive difference between the interest earned by James from scheme A and scheme B?
Difference = $1,025 - $250 = $775
Answer: B
Cheers,
Brent
