John invested 100 in each of the funds A and… | GMAT Sprint

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PS · Problem Solving

705-805

percent

John invested $100 in each of the funds A and B. After one year, the value of the money in fund A was $10 higher than the value of the money in fund B. After another year, the value of the money in fund A was $25 higher than the value of the money in fund B. If the value of the money in each fund increased by a fixed interest compounded annually, what was the annual interest of fund A?

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Explanation

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Official Explanation

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Since there is a difference of $10 on an amount of $100 in the first year, the difference in interest is 10%.

Let the rate of interest on A be

a

, so on B it becomes

a-10

.

At the end of 2 years:

A becomes

100(1+\frac{a}{100})^2

B becomes

100(1+\frac{a-10}{100})^2

The difference in values after two years is given as $25. Thus:

100(1+\frac{a}{100})^2-100(1+\frac{a-10}{100})^2=25

…

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What this question tests

Your ability to apply GMAT math concepts to solve a multi-step problem quickly and accurately. At the 705-805 level, accuracy and speed both matter.

Overcomplicating the setup — most GMAT problems reward a direct, organized approach over brute calculation.