Official Guide Explanation:
Problem Solving #D21

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Solution and Metadata

Question: D21
Page: 23
Difficulty: 4 (Moderately Easy)
Category 1: Word Problems > Interest Problems > Compound
Category 2: Arithmetic > Percents > other

Explanation: If an account earns 4% annual interest, compounded quarterly, it earns 1% each quarter. John started with $10,000, and we're looking for the amount in the account 6 months later, so the account will earn 1% twice.

1% of $10,000 is $100, so after 3 months, the account has earned $100 interest, for a total of $10,100. 1% of the resulting amount is $101, so after another three months, the account has earned an additional $101, for a total of $10,201, choice (D).

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