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Updated on: 29 Oct 2018, 22:27
00:00

Difficulty:

35% (medium)

Question Stats:

70% (02:10) correct 30% (02:00) wrong based on 59 sessions

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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?

A. $250 B.$775
C. $1025 D.$1750
E. $2000 To read all our articles:Must read articles to reach Q51 _________________ | '4 out of Top 5' Instructors on gmatclub | 70 point improvement guarantee | www.e-gmat.com Originally posted by EgmatQuantExpert on 09 Oct 2018, 03:09. Last edited by EgmatQuantExpert on 29 Oct 2018, 22:27, edited 1 time in total. Manager Joined: 08 Sep 2008 Posts: 123 Location: India Concentration: Operations, General Management Schools: ISB '20 GPA: 3.8 WE: Operations (Transportation) Re: James invested$ 5000 in scheme A for 1 year at a simple annual ......  [#permalink]

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09 Oct 2018, 04:10
EgmatQuantExpert wrote:
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?

A. $250 B.$775
C. $1025 D.$1750
E. $2000 To read all our articles:Must read articles to reach Q51 Plan A interest: 5000*0.05= 250 Plan B interest: 10000*0.05=500 (for 1st 6 month) And 10500*0.05=525( for next 6 months) Positive difference =775 Answer:B Sent from my iPad using GMAT Club Forum mobile app _________________ Regards; Vishal +==========+ Kudos if it deserve....one... CEO Joined: 11 Sep 2015 Posts: 3447 Location: Canada Re: James invested$ 5000 in scheme A for 1 year at a simple annual ......  [#permalink]

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09 Oct 2018, 09:03
Top Contributor
EgmatQuantExpert wrote:
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?

A. $250 B.$775
C. $1025 D.$1750
E. $2000 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 = $775 Answer: B Cheers, Brent _________________ Test confidently with gmatprepnow.com e-GMAT Representative Joined: 04 Jan 2015 Posts: 2597 Re: James invested$ 5000 in scheme A for 1 year at a simple annual ......  [#permalink]

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11 Oct 2018, 03:36

Solution

Given:
• James invested $5000 in scheme A for 1 year, and the simple annual interest rate is 5% • And, he also invested$10000 in scheme B for 1 year, and the annual interest rate is 10%, compounded semi-annually

To find:
• Difference between the interests earned from scheme A and scheme B

Approach and Working:
In scheme A, the interest earned by James = $$5% of 5000 = \frac{5*5000}{100} = 250$$

In scheme B,
• The interest earned by James in the first half of the year = ($$\frac{10}{2}$$)% of 10000 = $$\frac{5*10000}{100}$$ = $500 • And, the interest earned by James in the latter half of the year = ($$\frac{10}{2}$$)% of (10000 + 500) = $$\frac{5*10500}{100}$$ =$525
• Thus, the total interest earned for that year = $500 +$525 = $1025 Therefore, the positive difference in interests earned by James from schemes A and B =$1025 – $250 =$775

Hence, the correct answer is option B.

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