A. 360

B. 390

C. 400

D. 410

E. 420

The OA is C

**Source: GMAT Prep**

00:00

**A**

**B**

**C**

**D**

**E**

Nathan took out a student loan for 1200$ at 10 percent annual interest, compounded annually. If he did not repay any of the loan or interest during the first 3 years, which of the following is the closest to the amount of interest he owed for the 3 years.

A. 360

B. 390

C. 400

D. 410

E. 420

The OA is C

**Source: GMAT Prep**

A. 360

B. 390

C. 400

D. 410

E. 420

The OA is C

- GMATGuruNY
- GMAT Instructor
**Posts:**15495**Joined:**25 May 2010**Location:**New York, NY**Thanked**: 13060 times**Followed by:**1877 members**GMAT Score:**790

Since the 10% rate is compounded annually, the amount of interest increases by 10% each year:swerve wrote:Nathan took out a student loan for 1200$ at 10 percent annual interest, compounded annually. If he did not repay any of the loan or interest during the first 3 years, which of the following is the closest to the amount of interest he owed for the 3 years.

A. 360

B. 390

C. 400

D. 410

E. 420

First-year interest = 10% of 1200 = 120.

Second-year interest = (first-year interest) + 10% = 120 + 12 = 132.

Third-year interest = (second-year interest) + 10% = 132 + 13.2 = 145.2.

Total interest = 120 + 132 + 145.2 = 397.2.

The correct answer is C.

Mitch Hunt

Private Tutor for the GMAT and GRE

GMATGuruNY@gmail.com

If you find one of my posts helpful, please take a moment to click on the "UPVOTE" icon.

Available for tutoring in NYC and long-distance.

For more information, please email me at GMATGuruNY@gmail.com.

Student Review #1

Student Review #2

Student Review #3

Private Tutor for the GMAT and GRE

GMATGuruNY@gmail.com

If you find one of my posts helpful, please take a moment to click on the "UPVOTE" icon.

Available for tutoring in NYC and long-distance.

For more information, please email me at GMATGuruNY@gmail.com.

Student Review #1

Student Review #2

Student Review #3

- Scott@TargetTestPrep
- GMAT Instructor
**Posts:**3997**Joined:**25 Apr 2015**Location:**Los Angeles, CA**Thanked**: 43 times**Followed by:**20 members

We can use the annual compound interest formula: A = P(1 + r)^t. So we have:swerve wrote:Nathan took out a student loan for 1200$ at 10 percent annual interest, compounded annually. If he did not repay any of the loan or interest during the first 3 years, which of the following is the closest to the amount of interest he owed for the 3 years.

A. 360

B. 390

C. 400

D. 410

E. 420

The OA is C

Source: GMAT Prep

A = 1200(1 + 0.1)^3

A = 1200(1.1)^3

A = 1597.2

The amount of $1597.20 is the total amount (principal plus interest) he owes, so the amount of interest he owes is 1597.2 - 1200 = $397.2, or approximately $400.

Answer: C

Founder and CEO

scott@targettestprep.com

See why Target Test Prep is rated 5 out of 5 stars on BEAT the GMAT. Read our reviews