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CR Math

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Director
Joined: 10 Oct 2005
Posts: 524

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Location: US
CR Math [#permalink]

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24 Oct 2005, 20:07
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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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Manager
Joined: 14 Apr 2003
Posts: 84

Kudos [?]: 27 [0], given: 0

Re: CR Math [#permalink]

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24 Oct 2005, 20:25
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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Director
Joined: 14 Sep 2005
Posts: 984

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24 Oct 2005, 20:31
Sure (D).

Low interest rates mean more buying power.
_________________

Auge um Auge, Zahn um Zahn !

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Director
Joined: 15 Aug 2005
Posts: 793

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Location: Singapore

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25 Oct 2005, 05:12
D indeed!
Somehow it seems too easy to be true......
_________________

Cheers, Rahul.

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25 Oct 2005, 05:12
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