Hey guys! It’s time for our 2nd challenge question. This time, we’ll be focusing on a Problem Solving question.

**Submit an answer and an explanation in the comments by 2PM Pacific Standard Time on Thursday, and we will pick the comment with the best explanation as our winner. You can also comment on the post on our Facebook page. The winner will receive a free Magoosh account! 🙂 Comments will remain hidden until we release the answer and the name of the winner, so don’t worry– if you submitted an answer with an explanation, we can see it, even if it may not show up on the post for you! **

The answer will be posted on Thursday, after our winner is notified. Good luck!

In 2004, Cindy had $4000 in a mutual fund account. In 2005, the amount in the same account was $5000. If the percent increase from 2004 to 2005 was the same as the percent increase from 2005 to 2006, how much did Cindy have in this account in 2006?

a. $5800

b. $6000

c. $6250

d. $7500

e. $9000

**Answer and explanation: C. **

First we need to figure out the percent increase from 4000 to 5000. That’s a difference of 1000, and 1000 is 1/4 of the starting amount, 4000, so that’s a 25% increase. From 2004 to 2005, the mutual fund had a 25% increase (not shabby at all!) Then from 2005 to 2006, they had another 25% increase. Now, the starting amount is 5000. One quarter of 5000 is 1250, so that’s the dollar amount of the increase. The final amount would be 5000 + 1250 = 6250, answer = C

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This problem tests the concept of percent change. The formula for the percent change of a value is: [(New – Old) / |Old|] * 100.

In this case, we want to know the percent increase from 2004 to 2005 in order to apply it to the 2006 figure. Thus, we plug in the given amounts into the equation: [($5000 – $4000) / $4000] * 100 = ($1000 / $4000) * 100 = 25%.

Keeping in mind that $5000 is now the new ‘Old’ value, we can use the percent change equation again to find the final value of the mutual fund:

25% = [(X – $5000) / $5000] * 100, where X = Cindy’s account worth in 2006

.25 = (X – $5000) / $5000

$1250 = X – $5000

X = $6250

Cindy’s account will be worth $6250 in 2006. Our answer is C.

Hey Max! You have the best explanation and are our winner! 🙂 I just emailed you the details for setting up your free account. Thanks and congrats!

Mihir Khajanchi

5000-4000 = 1000

Therefore Cindy’s rate of return(in multiple) = 5000/4000 = 1.25(or 25%)

Hence in 2006, Cindy’s Investment will equal to 5000*1.25 = 6250 $

Hence the correct answer is C

Answer : C