Last visit was: 23 Apr 2026, 12:13 It is currently 23 Apr 2026, 12:13
Home
Messages
Tests
Schools
Events
Close
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
Go to My Error Log Learn more
Close
Request Expert Reply
Confirm Cancel
Back to Forum
Create Topic
Sub 505 (Easy)|   Sequences|      
User avatar
MathRevolution
User avatar
Math Revolution GMAT Instructor
Joined: 16 Aug 2015
Last visit: 27 Sep 2022
Posts: 10,063
Own Kudos:
20,000
 [2]
Given Kudos: 4
GMAT 1: 760 Q51 V42
GPA: 3.82
Expert
Expert reply
GMAT 1: 760 Q51 V42
Posts: 10,063
Kudos: 20,000
 [2]
For an investment, you start off with $1,000, the interest rate of 5%, 06 Jun 2017, 02:39
Kudos
Add Kudos
2
Bookmarks
Bookmark this Post
00:00
Start Timer
Pause Timer
Resume Timer
Show Answer
Hide
Show
History
D
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!

Difficulty:

5% (low)

Question Stats:

89% (01:24) correct 11% (01:48) wrong based on 167 sessions

History

Date
Time
Result
Not Attempted Yet
For an investment, you start off with $1,000, the interest rate of 5%, and you deposited two years as compound interest. What is the total interest earned in 2 years?

A. $96.5
B. $98.5
C. $100.5
D. $102.5
E. $105.2
ShowHide Answer
Official Answer
D
User avatar
sashiim20
User avatar
Joined: 04 Dec 2015
Last visit: 05 Jun 2024
Posts: 608
Own Kudos:
1,973
 [2]
Given Kudos: 276
Location: India
Concentration: Technology, Strategy
Schools: ISB '19 IIMB IIMA XLRI HEC Sept19 intake Rotman '21 NUS '21 NTU '20 Trinity MBA '20 Bocconi '21 Smurfit "21
WE:Information Technology (Consulting)
Schools: ISB '19 IIMB IIMA XLRI HEC Sept19 intake Rotman '21 NUS '21 NTU '20 Trinity MBA '20 Bocconi '21 Smurfit "21
Posts: 608
Kudos: 1,973
 [2]
For an investment, you start off with $1,000, the interest rate of 5%, 06 Jun 2017, 02:56
1
Kudos
Add Kudos
1
Bookmarks
Bookmark this Post
MathRevolution
For an investment, you start off with $1,000, the interest rate of 5%, and you deposited two years as compound interest. What is the total interest earned in 2 years?

A. $96.5
B. $98.5
C. $100.5
D. $102.5
E. $105.2
Show more

Formula for Amount when principal has compound interest = A = P\([1+\frac{r}{100}]^n\)
A = Amount, P = Principal, r = Rate of interest, n = Time

Given, P = $1000, r = 5%, n = 2 years

Therefore Amount = 1000 \((1 + \frac{5}{100})^2\) = 1000 \((1 + 0.05)^2\) = 1000 \((1.05)^2\) = 1000 x 1.05 x 1.05 = 1102.5

Compound interest (CI) earned in 2 years = Amount - Principal = 1102.5 - 1000 = $102.5 . Answer D...
User avatar
arvind910619
User avatar
Joined: 20 Dec 2015
Last visit: 18 Oct 2024
Posts: 814
Own Kudos:
615
 [1]
Given Kudos: 755
Status:Learning
Location: India
Concentration: Operations, Marketing
GMAT 1: 670 Q48 V36
GRE 1: Q157 V157
GPA: 3.4
WE:Engineering (Manufacturing)
Products:
My Reviews
GMAT 1: 670 Q48 V36
GRE 1: Q157 V157
Posts: 814
Kudos: 615
 [1]
For an investment, you start off with $1,000, the interest rate of 5%, 06 Jun 2017, 04:42
1
Kudos
Add Kudos
Bookmarks
Bookmark this Post
IMO D
Can be solved using the formula
A = P[1+r100]n
User avatar
MathRevolution
User avatar
Math Revolution GMAT Instructor
Joined: 16 Aug 2015
Last visit: 27 Sep 2022
Posts: 10,063
Own Kudos:
20,000
 [1]
Given Kudos: 4
GMAT 1: 760 Q51 V42
GPA: 3.82
Expert
Expert reply
GMAT 1: 760 Q51 V42
Posts: 10,063
Kudos: 20,000
 [1]
For an investment, you start off with $1,000, the interest rate of 5%, 08 Jun 2017, 00:54
1
Kudos
Add Kudos
Bookmarks
Bookmark this Post
==> You get \(1,000(1+0.05)^2-1,000=102.5.\)

The answer is D.
Answer: D
User avatar
JeffTargetTestPrep
User avatar
Target Test Prep Representative
Joined: 04 Mar 2011
Last visit: 05 Jan 2024
Posts: 2,974
Own Kudos:
8,710
Given Kudos: 1,646
Status:Head GMAT Instructor
Affiliations: Target Test Prep
Expert
Expert reply
Posts: 2,974
Kudos: 8,710
For an investment, you start off with $1,000, the interest rate of 5%, 10 Jun 2017, 08:11
Kudos
Add Kudos
Bookmarks
Bookmark this Post
MathRevolution
For an investment, you start off with $1,000, the interest rate of 5%, and you deposited two years as compound interest. What is the total interest earned in 2 years?

A. $96.5
B. $98.5
C. $100.5
D. $102.5
E. $105.2
Show more

After year 1, the amount of interest earned is 0.05 x 1000 = 50 dollars, so the amount of the investment at the end of year 1 is 1,050 dollars.

The amount of interest earned in year 2 is 1,050 x 0.05 = 52.50 dollars.

Thus, the total amount of interest earned is 50 + 52.50 = 102.50 dollars.

Alternate solution:

Recall that the compound interest formula, if the interest is compounded annually, is:

A = P(1 + r)^t, where P is the principal (i.e., amount deposited), r is the interest rate, t is the number of years, and A is the total amount after the interest has been added.

So, here we have:

A = 1000(1 + 0.05)^2 = 1000(1.05)^2 = 1000(1.1025) = $1102.5. Thus, the interest earned in 2 years is:

1102.5 - 1000 = $102.5

Answer: D
User avatar
danlew
User avatar
Joined: 03 Feb 2017
Last visit: 21 Jan 2018
Posts: 66
Own Kudos:
129
 [1]
Given Kudos: 31
Location: Australia
GMAT 1: 720 Q48 V40
GMAT 1: 720 Q48 V40
Posts: 66
Kudos: 129
 [1]
For an investment, you start off with $1,000, the interest rate of 5%, 10 Jun 2017, 09:12
1
Kudos
Add Kudos
Bookmarks
Bookmark this Post
Using simple interest, the interest would be $50 for one year, or $100 for 2 years.
But since this is compound interest, the interest would have to be slightly higher, so D seems the best choice, without going into compound interest calculations.
avatar
SIDDHARTH1901
avatar
Joined: 27 Jun 2020
Last visit: 19 May 2021
Posts: 14
Own Kudos:
3
 [1]
Given Kudos: 30
Posts: 14
Kudos: 3
 [1]
For an investment, you start off with $1,000, the interest rate of 5%, 19 Apr 2021, 02:59
1
Kudos
Add Kudos
Bookmarks
Bookmark this Post
At end of first year interest will be 5% of 1000 = 1000*5/100= 50.
Now amount is 1000+50= 1050.

At end of second year, interest will be 5% of 1050= 1050*5/100= 52.5

Total interest = 50 + 52.5 = 102.5

Posted from my mobile device
User avatar
bumpbot
User avatar
Non-Human User
Joined: 09 Sep 2013
Last visit: 04 Jan 2021
Posts: 38,964
Own Kudos:
1,117
Posts: 38,964
Kudos: 1,117
For an investment, you start off with $1,000, the interest rate of 5%, 11 Oct 2024, 03:46
Kudos
Add Kudos
Bookmarks
Bookmark this Post
Automated notice from GMAT Club BumpBot:

A member just gave Kudos to this thread, showing it’s still useful. I’ve bumped it to the top so more people can benefit. Feel free to add your own questions or solutions.

This post was generated automatically.
Moderators:
Bunuel
Math Expert
109783 posts
Krunaal
Tuck School Moderator
853 posts