If $1,000 is deposited in a certain bank account and remains in the account along with any accumulated interest, the dollar amount of interest, I, earned by the deposit in the first n years is given by the formula I=1,000((1+r/100)^n−1), where r percent is the annual interest rate paid by the bank. Is the annual interest rate paid by the bank greater than 8 percent? GMAT Explanation + Additional Examples!

If $1,000 is deposited in a certain bank account and remains in the account along with any accumulated interest, the dollar amount of interest, I, earned by the deposit in the first n years is given by the formula \( I = 1{,}000\left(\left(1+\frac{r}{100}\right)^n-1\right) \), where r percent is the annual interest rate paid by the bank. Is the annual interest rate paid by the bank greater than 8 percent?

(1) The deposit earns a total of $210 in interest in the first two years
(2) \( \left(1+\frac{r}{100}\right)^2 > 1.15 \)

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Correct Answer: A