Hello,
I am not able to solve this question. Can you please assist?
If a loan of P dollars, at an interest rate of r percent per year compounded monthly, is payable in n monthly installments of m dollars each, then m is determined by the formula:
m = (rP/1200)/( 1 - (1 + r/1200)^-n)
John and Sue took out loans whose monthly installments were determined by using the formula above. Both loans had the same interest rate and the same number of monthly installments. John's monthly installment was what percent of Sue's monthly installment?
(1) The amount of Sue's loan was 4 times the amount of John's loan.
(2) Sue's monthly installment was 4 times John's monthly installment.
OA: D
The compound interest formula that I use from MGMAT guide is
CI = P (1 + r/n)^(nt)
where, r = annual rate of interest, n = number of times a year and t = number of years.
I was not sure if for this question, I first needed to simplify the formula given in the question since monthly installment is n.
Thanks a lot for your help,
Sri
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If a loan of P dollars, at an interest rate of r percent
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The formula is irrelevant.
It is offered for one purpose only: to induce us to do unnecessary work.
The problem can be rephrased as follows:
Since Sue's loan is 4 times John's loan, her monthly installment is 4 times John's monthly installment.
Thus, for every $1 John pays monthly, Sue pays $4 monthly, implying that J/S = 1/4 = 25%.
SUFFICIENT.
Statement 2: Sue's monthly installment was 4 times John's monthly installment.
Thus, for every $1 John pays monthly, Sue pays $4 monthly, implying that J/S = 1/4 = 25%.
SUFFICIENT.
The correct answer is D.
It is offered for one purpose only: to induce us to do unnecessary work.
The problem can be rephrased as follows:
Statement 1: The amount of Sue's loan was 4 times the amount of John's loan.John and Sue each took out a loan. Both loans had the same annual interest rate, payable in the same number of monthly installments. John's monthly installment was what percent of Sue's monthly installment?
(1) The amount of Sue's loan was 4 times the amount of John's loan.
(2) Sue's monthly installment was 4 times John's monthly installment.
Since Sue's loan is 4 times John's loan, her monthly installment is 4 times John's monthly installment.
Thus, for every $1 John pays monthly, Sue pays $4 monthly, implying that J/S = 1/4 = 25%.
SUFFICIENT.
Statement 2: Sue's monthly installment was 4 times John's monthly installment.
Thus, for every $1 John pays monthly, Sue pays $4 monthly, implying that J/S = 1/4 = 25%.
SUFFICIENT.
The correct answer is D.
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Followed here and elsewhere by over 1900 test-takers.
I have worked with students based in the US, Australia, Taiwan, China, Tajikistan, Kuwait, Saudi Arabia -- a long list of countries.
My students have been admitted to HBS, CBS, Tuck, Yale, Stern, Fuqua -- a long list of top programs.
As a tutor, I don't simply teach you how I would approach problems.
I unlock the best way for YOU to solve problems.
For more information, please email me (Mitch Hunt) at [email protected].
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