CR Math : GMAT Critical Reasoning (CR)
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CR Math

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Director
Joined: 10 Oct 2005
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CR Math [#permalink]

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24 Oct 2005, 19:07
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Please explain with answer

In Millington, a city of 50,000 people, Mercedes Pedrosa, a realtor, calculated that a family with Millingtonâ€™s median family income, $28,000 a year, could afford to buy Millingtonâ€™s median-priced$77,000 house. This calculation was based on an 11.2 percent mortgage interest rate and on the realtorâ€™s assumption that a family could only afford to pay up to 25 percent of its income for housing.
Which of the following corrections of a figure appearing in the passage above, if it were the only correction that needed to be made, would yield a new calculation showing that even incomes below the median family income would enable families in Millington to afford Millingtonâ€™s median-priced house?
(A) Millingtonâ€™s total population was 45,000 people.
(B) Millingtonâ€™s median annual family income was $27,000. (C) Millingtonâ€™s median-priced house cost$80,000.
(D) The rate at which people in Millington had to pay mortgage interest was only 10 percent.
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Re: CR Math [#permalink]

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24 Oct 2005, 19:25
mahesh004 wrote:
Please explain with answer

In Millington, a city of 50,000 people, Mercedes Pedrosa, a realtor, calculated that a family with Millingtonâ€™s median family income, $28,000 a year, could afford to buy Millingtonâ€™s median-priced$77,000 house. This calculation was based on an 11.2 percent mortgage interest rate and on the realtorâ€™s assumption that a family could only afford to pay up to 25 percent of its income for housing.
Which of the following corrections of a figure appearing in the passage above, if it were the only correction that needed to be made, would yield a new calculation showing that even incomes below the median family income would enable families in Millington to afford Millingtonâ€™s median-priced house?
(A) Millingtonâ€™s total population was 45,000 people.
(B) Millingtonâ€™s median annual family income was $27,000. (C) Millingtonâ€™s median-priced house cost$80,000.
(D) The rate at which people in Millington had to pay mortgage interest was only 10 percent.

(A) Millingtonâ€™s total population was 45,000 people.
This may or may not shift the median income favorably.

(B) Millingtonâ€™s median annual family income was $27,000. If median shifts down then less people will buy house keeping everything same. (C) Millingtonâ€™s median-priced house cost$80,000.
If house price increases less people will buy.

(D) The rate at which people in Millington had to pay mortgage interest was only 10 percent.
------ If rate decreases more people can buy. So I would go with D.
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24 Oct 2005, 19:31
Sure (D).

Low interest rates mean more buying power.
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Auge um Auge, Zahn um Zahn !

Director
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25 Oct 2005, 04:12
D indeed!
Somehow it seems too easy to be true......
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Cheers, Rahul.

25 Oct 2005, 04:12
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