Official Guide Explanation:
Problem Solving #78




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Solution and Metadata

Question: 78
Page: 163
Difficulty: 4 (Moderately Easy)
Category 1: Word Problems > Interest Problems > Compound
Category 2: Arithmetic > Percents > other

Explanation: If an investment returns 8 percent semiannually over the course of one year, that means it returns 4 percent twice. Since the interest compounds, we’ll have to first find the result of a 4% increase, then the result of a second 4% increase. Since the investment amount is $10,000, the first 4% is $400, for a total of $10,400. The second 4% is a little trickier to calculate, but just find 1% ($104) and multiply by 4: $416. Add $400, the return for the first six months, and $416 for the total amount of interest, $816, choice (C).

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