sanchu wrote:A car loan is offered a 8% annual interest, compounded annually. After the first year, the interest due is $240. What is the principal on the loan?
1000
3000
4000
5000
6000
I've added answer choices, which the GMAT would provide.
Keep it simple.
Since the interest is compounded annually, the interest starts to be compounded only AFTER the first year.
Thus, the $240 earned during the first year is NOT compounded and thus is simply 8% of the principal:
240 = (8/100)x
x = 24000/8 = 3000.
The correct answer is
B.
An alternate approach is to PLUG IN THE ANSWERS, which represent the principal.
8% of the correct answer choice must yield $240 in interest.
Answer choice C: 4000
(8/100)(4000) = 320.
The correct answer must be smaller.
Eliminate C, D and E.
Answer choice B: 3000
(8/100)(3000) = 240.
Success!
The correct answer is
B.
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
