Mary deposited a sum of $x$ dollars into an account that earned 4% annual interest compounded annually. One year later she deposited an additional $x$ dollars in the account. There were no other transactions. If the account showed $y$ dollars at the end of the two years, which of the following expresses $x$ in terms of $y$ ?

Correct answer marked below

y/2.04

y/1.12

y/2.2

y/(1.04\times 2.04)

Correct

y/((1.04)^2\times 2.04)

You can see the correct answer above. Sign in for free to unlock the complete worked solution.

Get detailed analytics, unlock full explanations, and move up difficulty tiers as you practice.

Explanation

Create a free account to reveal the correct answer, see the step-by-step explanation, and start tracking your GMAT progress.

Comments

AddyontherocksJul 13

This one got me because I forgot the first deposit also keeps growing during the second year. Took me way longer than it should have.

TommasoJul 22

Same here, the timeline is sneaky. I had to literally write out year by year.

CiroJul 23

Yeah once you list what's in the account at the end of each year it gets way clearer.

RodanthiMay 2

Why is (B) wrong? I keep getting y/1.12 when I try to shortcut it.

ArjunMay 8

Because the first x gets compounded twice, not just once. The shortcut treats both deposits the same.

DevanganaMay 4

Think about it: the first deposit earns interest for 2 years, the second only for 1. They're not equal.

UnwuonJun 1

Tricky but fair. The trap choices are all close to each other so you can't guess your way out.

DhevaJun 2

Right, you actually have to set up the equation properly. Good question.

Leonardo10h ago

Thanks, this was helpful practice.

What this question tests

Your ability to compute percentage change, percentage of a whole, and to work backwards from a final value.

Treating successive percentage changes as additive — a 10% rise then a 10% fall is not back to the start.