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The difference between the simple interest after 2 years and the compo

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Math Expert
Joined: 02 Sep 2009
Posts: 58427
The difference between the simple interest after 2 years and the compo  [#permalink]

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10 Jul 2017, 02:31
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Difficulty:

85% (hard)

Question Stats:

52% (02:27) correct 48% (01:38) wrong based on 79 sessions

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The difference between the simple interest after 2 years and the compound interest for 1 year on the same sum of money is \$111. What is the sum of money?

(1) The rate of interest for simple interest is 5 percent per annum.
(2) The rate of interest for compound interest is 3 percent greater than the rate of simple interest per annum

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Joined: 12 Nov 2016
Posts: 70
Re: The difference between the simple interest after 2 years and the compo  [#permalink]

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10 Jul 2017, 10:06
B

The difference between the simple interest after 2 years and the compound interest for 1 year on the same sum of money is \$111. What is the sum of money?

(1) The rate of interest for simple interest is 5 percent per annum.
(2) The rate of interest for compound interest is 3 percent greater than the rate of simple interest per annum
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Joined: 21 Aug 2017
Posts: 77
Location: United States
Schools: Oxford"20 (A)
GMAT 1: 700 Q43 V42
Re: The difference between the simple interest after 2 years and the compo  [#permalink]

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16 Jan 2018, 19:33
This is tricky. I initially picked E thinking that because I do not know the frequency it is compounded, I have no way of deriving the initial sum.

1) Good to know the percentage of the simple, but there are still too many unknown variables. Insufficient.

2) I initially thought that this suggested that the rate of the compound interest is 8%, and it didn't tell us anything about the way in which is was compounded. After reviewing I'm now under the impression that that takes into account the compounding scheduling, which makes it a higher effective rate of interest. However, since we still don't know what that simple interest is, this is insufficient as well.

Combine them together, you have the simple interest rate, you have the effective compound interest rate, and you have a duration and difference of interest. You can get the initial investment.

C.

I don't know how I feel about this one. I like that it's making me think critically right now and learn what sort of information I truly need, but I hope that this is more wordplay than I would ever see on the test. If I see 37 of these, I'm getting 2/37 on it for sure.
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Joined: 07 Dec 2017
Posts: 316
GMAT 1: 660 Q50 V30
Re: The difference between the simple interest after 2 years and the compo  [#permalink]

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16 Jan 2018, 20:26
jsheppa wrote:
This is tricky. I initially picked E thinking that because I do not know the frequency it is compounded, I have no way of deriving the initial sum.

1) Good to know the percentage of the simple, but there are still too many unknown variables. Insufficient.

2) I initially thought that this suggested that the rate of the compound interest is 8%, and it didn't tell us anything about the way in which is was compounded. After reviewing I'm now under the impression that that takes into account the compounding scheduling, which makes it a higher effective rate of interest. However, since we still don't know what that simple interest is, this is insufficient as well.

Combine them together, you have the simple interest rate, you have the effective compound interest rate, and you have a duration and difference of interest. You can get the initial investment.

C.

I don't know how I feel about this one. I like that it's making me think critically right now and learn what sort of information I truly need, but I hope that this is more wordplay than I would ever see on the test. If I see 37 of these, I'm getting 2/37 on it for sure.

I still can't get it,

We still need compounded intervel information
How cn one can calculate with out it
Re: The difference between the simple interest after 2 years and the compo   [#permalink] 16 Jan 2018, 20:26
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