Problem Solving - 39

On a certain day, Tim invest $1,000 at 10 percent annual interest, compound annually, and Lana invested $ 2,000 at 5 percent annual interest, compound annually. The total amount of interest earned by Tim's investment in the first 2 years was how much greater than the total amount of interest earned by Lana's investment in the first 2 years?

A. 5
B. 15
C. 50
D. 100
E. 105

Answer: A

Amount = P[1+(r/100)] ^ t
Tim's investment Amount = 1000(1+10%)^2=1210
Interest earned by Tim = Amount - P = 1210 - 1000 = 210
Lana's investment Amount = 2000(1+5%)^2=2205
Interest earned by Lana = Amount - P = 2205 - 2000 = 205
Hence 210-205=5

Manhattan Challenge Problem of the Week - July 5

Louie takes out a three-month loan of $1000. The lender charges him 10% interest per month compunded monthly. The terms of the loan state that Louie must repay the loan in three equal monthly payments. To the nearest dollar, how much does Louie have to pay each month?

(A) 333

(B) 383

(C) 402

(D) 433

(E) 483

Answer - C

For solution click on the link below
Manhattan challenge problem