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Jim needs $1,000 to buy a new flat-screen TV. Since he has

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Jim needs $1,000 to buy a new flat-screen TV. Since he has [#permalink] New post 09 Sep 2013, 01:29
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Jim needs $1,000 to buy a new flat-screen TV. Since he has only $7, he borrows the remaining balance from his sister Mary. The loan will be repaid in 3 annual installments at an interest rate of 10%, compounded annually. The formula for calculating the monthly payment P is P = (L x C x r) / (C – 1) where L = amount of the loan, r = annual interest rate, and C = compounding factor = (1 + r)^N where N = number of annual payments. How much does Jim have to pay Mary at the end of each of the next 3 years (rounded to the nearest penny)?

A. $357.67
B. $375.85
C. $387.40
D. $399.30
E. $433.33

Any idea how to solve this ?
I don't know the answer :(

Last edited by Bunuel on 09 Sep 2013, 02:11, edited 1 time in total.
Renamed the topic, edited the question and moved to PS forum.
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Re: Jim needs $1,000 to buy a new flat-screen TV. Since he has [#permalink] New post 09 Sep 2013, 04:20
BugDGmat wrote:
Jim needs $1,000 to buy a new flat-screen TV. Since he has only $7, he borrows the remaining balance from his sister Mary. The loan will be repaid in 3 annual installments at an interest rate of 10%, compounded annually. The formula for calculating the monthly payment P is P = (L x C x r) / (C – 1) where L = amount of the loan, r = annual interest rate, and C = compounding factor = (1 + r)^N where N = number of annual payments. How much does Jim have to pay Mary at the end of each of the next 3 years (rounded to the nearest penny)?

A. $357.67
B. $375.85
C. $387.40
D. $399.30
E. $433.33

Any idea how to solve this ?
I don't know the answer :(


L = 993
r = 0.1
C = 1.1^3 = 1.331
Insert all of these in the formula and we get
P = 993*1.331*0.1/0.331

In order to resolve above without a calc, we need to find the approx value of 0.1331/0.331 ~ 0.4~
~ 993*0.4
~ 397

Answer D should be the one.
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Re: Jim needs $1,000 to buy a new flat-screen TV. Since he has [#permalink] New post 10 Sep 2013, 00:22
Expert's post
BugDGmat wrote:
Jim needs $1,000 to buy a new flat-screen TV. Since he has only $7, he borrows the remaining balance from his sister Mary. The loan will be repaid in 3 annual installments at an interest rate of 10%, compounded annually. The formula for calculating the monthly payment P is P = (L x C x r) / (C – 1) where L = amount of the loan, r = annual interest rate, and C = compounding factor = (1 + r)^N where N = number of annual payments. How much does Jim have to pay Mary at the end of each of the next 3 years (rounded to the nearest penny)?

A. $357.67
B. $375.85
C. $387.40
D. $399.30
E. $433.33

Any idea how to solve this ?
I don't know the answer :(


Similar question to practice: louie-takes-out-a-three-month-loan-of-1000-the-lender-101506.html
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Re: Jim needs $1,000 to buy a new flat-screen TV. Since he has   [#permalink] 10 Sep 2013, 00:22
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