[jjg88]

Bob bought $2000 in X stock that earned 16% last quarter. If Bob invests his earnings along with his original investment, how much will he have total if he earns 12% at the end of next quarter?

I'm going crazy trying to solve this. I can't seem to get the right answer!

[ArcSine]

Show your computational attempts, and also how you know your answer isn't correct.

[jjg88]

My Work: (I don't thing I'm doing this right? Help.. please)

2000(.16) = 320

2000 + 320 = 2320

2320(.12) = 278.40 

2320 + 278.40 = 2598.40 

[ArcSine]

Yep, you got it.

For future reference, you can cut the number of steps in half by noting that when you multiplied the original principal by 0.16, and then added the result back to the original principal...

(2,000 x 0.16) = 320; 320 + 2,000 = 2,320

... it's equivalent to just a one-time multiplication of 2,000 by 1.16:

2,000(1.16) = 2,320

Hence you could've arrived at the answer via

2,000(1.16)(1.12) = 2,598.40

Not a huge time-saver in this particular situation, but it's rather helpful when you have some investment growing by various rates over a large number of future periods.