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Interest Payment

by jk2010 » Sat Mar 05, 2011 11:22 am
I think this is a deceptive (at least poorly written) question from 800 Score.

Joelle lent $6000 to a friend who was opening up a coffee shop. The friend agreed to pay 8% interest on the loan annually, payable in equal monthly installments. What was the value of each installment payment that Joelle received?

A) $40
B) $120
C) $240
D) $400
E) $480

Answer
A
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by jk2010 » Sat Mar 05, 2011 11:25 am
The problem I have with this is that the answer neglects to address the principal. I worked this out to solve for 6480/12 = 540, which of course is not an answer. Perhaps I am jaded by looking for tricks.
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by Night reader » Sat Mar 05, 2011 1:08 pm
@jk, they want Joelle to pay only interest --> $6,000*8% in monthly installments = $40, though there's a room for us to assume the principal amount ($500) too, GMAT :(
jk2010 wrote:I think this is a deceptive (at least poorly written) question from 800 Score.

Joelle lent $6000 to a friend who was opening up a coffee shop. The friend agreed to pay 8% interest on the loan annually, payable in equal monthly installments. What was the value of each installment payment that Joelle received?

A) $40
B) $120
C) $240
D) $400
E) $480

Answer
A
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by vineeshp » Sat Mar 05, 2011 9:52 pm
I agree and disagree.
"The friend agreed to pay 8% interest on the loan annually, payable in equal monthly installments. " This statement is supposed to make us assume that he only pays interest. But it should really be more expicit about what happens to the interest. I don't think GMAT would have left that out. They always give explicit information about assumptions to make.
Vineesh,
Just telling you what I know and think. I am not the expert. :)
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