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# Quick IR Question

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Intern
Joined: 13 Oct 2011
Posts: 9
Concentration: Entrepreneurship, Finance
WE: Corporate Finance (Advertising and PR)
Followers: 0

Kudos [?]: 5 [0], given: 1

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18 Jun 2012, 22:09
This is my first topic so please be kind. The question below is an IR question that I am having trouble setting up. Any input from members would be greatly appreciated.
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Kaplan GMAT Instructor
Joined: 25 Aug 2009
Posts: 644
Location: Cambridge, MA
Followers: 82

Kudos [?]: 265 [2] , given: 2

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18 Jun 2012, 23:03
2
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Expert's post
crindo2 wrote:
This is my first topic so please be kind. The question below is an IR question that I am having trouble setting up. Any input from members would be greatly appreciated.

Hi Crindo,

You're looking at a classic mixture problem--you can check out here for a little more detail on them.

Basically, we are "mixing" 4% and 8% interest, to get r% interest. Although this problem is discussing interest rates, we shouldn't be distracted, because we don't need any fancy formulas for calculating them. We can use the mixture formula alone--which is, conveniently, given to us by the question stem!

r is given to us as 5%, so we can plug that in to the mixture formula given in the question stem. Do so, then remove fractions:

5(x + y) = 4x + 8y

Distribute:

5x + 5y = 4 x + 8y

Combine like terms:

x = 3y

Now, many TPA problems will not have a single algebraic solution. This is two variables in one equation; it's unsolvable. But we have a limited number of choices to solve for. Plug them in, and we'll find that the only set of answers that works is x = 96, y = 32
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Eli Meyer
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Intern
Joined: 13 Oct 2011
Posts: 9
Concentration: Entrepreneurship, Finance
WE: Corporate Finance (Advertising and PR)
Followers: 0

Kudos [?]: 5 [0], given: 1

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19 Jun 2012, 10:27
Thanks so much Eli!
Re: Quick IR Question   [#permalink] 19 Jun 2012, 10:27
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