A certain bank uses the formula above to approximate the

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GMAT Prep
$$R=\frac{\frac{24F}{N}}{P+\frac{A}{12}}$$
A certain bank uses the formula above to approximate the annual percentage rate R of a monthly installment loan. Which of the following is an equivalent form of the formula?

A. R = 24F(12P + A)/(12N)
B. R = 24F/(12NP + AN)
C. R = 2F/(N(P + A))
D. R = 288F/(PN + AN)
E. R = 288F/(12NP + AN)

OA E

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Hi All,

We're asked for the mathematical equivalent of the following formula:

$$R=\frac{\frac{24F}{N}}{P+\frac{A}{12}}$$

While the prompt (and the answers) might look 'complex', the work involved is based on a simple math premise (common denominators), so as long as you are thorough about your work, this prompt shouldn't be too difficult.

To start, we should try to 'get rid' of the "A/12" in the denominator. We can do that by multiplying every term by 12 (both in the numerator and the denominator). That would give us....

(12)(24F/N) / (12P + A)

(12)(24F) = 288F, so we have...

(288F/N) / (12P + A)

In simple terms, this means "take 288F and divide it by N... then divide that total by (12P + A). You can 'combine' those two division steps into one big step by multiplying the "N" and the "(12P + A)"....

(288F) / (N)(12P + A)

Then distribute the N...

(288F)/(12PN + AN)

Final Answer: E

GMAT assassins aren't born, they're made,
Rich

[Scott@TargetTestPrep]

GMAT Prep
$$R=\frac{\frac{24F}{N}}{P+\frac{A}{12}}$$
A certain bank uses the formula above to approximate the annual percentage rate R of a monthly installment loan. Which of the following is an equivalent form of the formula?

A. R = 24F(12P + A)/(12N)
B. R = 24F/(12NP + AN)
C. R = 2F/(N(P + A))
D. R = 288F/(PN + AN)
E. R = 288F/(12NP + AN)

OA E

We can multiply the given fractional expression by 12N/12N, to obtain:

R = (24F * 12)/(P * 12N + A * N)

R = 288F/(12NP + AN)

Answer: E