GMAT Quantitative Reasoning Practice Test 6

Question : 26 of 100

Marks: +1, -0

The formula for compounded interest can be defined as

A = p (1 + r)^n

, where A is the total value of the investment, p is the principle invested, r is the interest rate per period, and n is the number of periods. If a

\$1,000

principle is invested, which bank gives a better interest rate for a savings account, Bank A or Bank B?
(1) The interest rate at Bank

A

4 \%

compounded annually.
(2) The total amount of interest earned at Bank B over a period of five years is

\$ 276.28

Statement (1), BY ITSELF, will suffice to solve the problem, but NOT statement (2) by itself.
Statement (2), BY ITSELF, will suffice to solve the problem, but NOT statement (1) by itself.
The problem can be solved using statement (1) and statement (2) TOGETHER, but not ONLY statement (1) or statement (2).
The problem can be solved using EITHER statement (1) only or statement (2) only.
The problem CANNOT be solved using statement (1) and statement (2) TOGETHER.

Solution:

In order to have enough information to substitute into the formula, you would need both statements. Use

p=\$ 1,000

r=0.04

and

n=5

to compare Bank A to Bank B. Again, you do not need to actually compute the interest earned once you can answer the question.

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