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In Millington, a city of 50,000 people, Mercedes Pedrosa, a [#permalink]

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18 Oct 2005, 20:29

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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.
(E) Families in Millington could only afford to pay up to 22 percent of their annual income for housing.
_________________

(A) Still what each pays doesn't change
(B) Now they are less capable of buying the median priced house
(C) same as above
(D) If they pay less interest rate, they can afford more and buy a higher priced house
(E) same as B and C

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. (E) Families in Millington could only afford to pay up to 22 percent of their annual income for housing.

My answer is D.
Any of the following options would enables families to affort median priced house.
1) Higher median of the annual family income (or)
2) Lower median-priced house cost (or)
3) Lower interest rates.
Of the answer choices provided only option D would enables families to affort median priced house.

Only D reduces the financing on the debt that families would have to repay, even at a lower income.

even incomes below the median family income is a very ambiguous statement and leaves open the possibility that families making $76,000 could afford the payments.

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