the difference in compound interest earned on a deposit ( compounded annually ) in year 1 and year 2 is $ 40 . had the interest rate been 3 times its present value , the difference a would have been how much ? Select the correct option:
A) 40 / 3
B) 40
C) 120
D) 360
E) 420

Rationale: case 1 : deposit = $ x ; rate of increase = r . interest yearned in 1 year = xr . deposit in 1 year = x + xr . interest yearned in 2 year = ( x + xr ) r . the difference a = ( x + xr ) r - xr = xr ^ 2 = 40 . case 2 : deposit = $ x ; rate of increase = 3 r . interest yearned in 1 year = x ( 3 r ) . deposit in 1 year = x + 3 xr . interest yearned in 2 year = ( x + 3 xr ) 3 r . the difference = ( x + 3 xr ) 3 r - 3 xr = 9 xr ^ 2 . since from case 1 we know that xr ^ 2 = 40 , then 9 xr ^ 2 = 9 * 40 = 360 . answer : d .
Answer: D