Hi, there. I'm happy to help with this.
Essentially, this question is asking for the effective interest rate
So, every increase of 2% means we multiply x by the multiplier 1.02. The initial amount x gets multiplied by this multiply four times, one for each quarter, so . . .
y = x*(1.02)^4 = (1.08243216)*x ====> effective interest = 8.2432%
That's how you'd get the exact answer with a calculator, but of course you don't have a calculator available on GMAT PS questions. Think about it this way. With simple interest, 2% a quarter would add up to 8% annual. With compound interest, where you get interest on your interest, you will do a little better than you would with simple interest, so the answer should be something slightly above 8%. That leads us to . . .
Does that make sense? Please let me know if you have any additional questions on what I've said there.
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