Carl is facing very difficult financial times and can only pay the interest on a $10,000 loan he has taken. The bank charges him a quarterly compound rate of 4%. What is the approximate interest he pays annually?  Pick.
A) $1600  B) $2000  C) $2150  D) $2500  E) $12000
Usually, you are given the annual rate of interest and it is mentioned that it is annual rate.   The bank charges him a quarterly compounded ANNUAL rate of 16%.   Here you find per quarter rate as  (16/4)= 
<gadget id="calculator"> (16/4)</gadget>
<output>4</output>
4%   I have actually never seen a question with quarter rate given but since this question did not mentionannual rate of interestand since the options did not make sense with 4% annual rate of interest, it is apparent that the intent was a 4% quarterly rate. So the bank charges 4% every quarter and compounds it in the next quarter. Had it been a simple quarterly rate, we would have just found 4 * 4% of 10,000= $1600 as our answer.   But since, the interest is compounded, it will be a bit more than $1600. Option ($1600) looks correct.
<result>A</result>
Carl is facing very difficult financial times and can only pay the interest on a $10,000 loan he has taken. The bank charges him a quarterly compound rate of 4%. What is the approximate interest he pays annually?