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
5-Day Free Trial
5-day free, full-access trial TTP
Available with Beat the GMAT members only code
MORE DETAILS
Nathan took out a student loan for 1200$ at 10 percent
This topic has expert replies
-
GMATGuruNY
- GMAT Instructor
- Posts: 15539
- Joined: Tue May 25, 2010 12:04 pm
- Location: New York, NY
- Thanked: 13060 times
- Followed by:1906 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.
Private tutor exclusively for the GMAT and GRE, with over 20 years of experience.
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].
Student Review #1
Student Review #2
Student Review #3
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].
Student Review #1
Student Review #2
Student Review #3
GMAT/MBA Expert
-
Scott@TargetTestPrep
- GMAT Instructor
- Posts: 7243
- Joined: Sat Apr 25, 2015 10:56 am
- Location: Los Angeles, CA
- Thanked: 43 times
- Followed by:29 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
Scott Woodbury-Stewart
Founder and CEO
[email protected]
See why Target Test Prep is rated 5 out of 5 stars on BEAT the GMAT. Read our reviews
