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

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Senior Manager
Joined: 30 Oct 2004
Posts: 284
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.
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-Vikram

Director
Joined: 21 Aug 2005
Posts: 789

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18 Oct 2005, 20:43
I choose D

(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
Manager
Joined: 15 Aug 2005
Posts: 198
Location: New York
Re: CR: Some math.... Millington [#permalink]

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18 Oct 2005, 20:50
It looks like D.

A seems irrelevant.

B, C, and E imply fewer families can afford the houses.
SVP
Joined: 05 Apr 2005
Posts: 1710

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18 Oct 2005, 20:50
Only intrest rate changes the median price of the house..
GMAT Club Legend
Joined: 07 Jul 2004
Posts: 5043
Location: Singapore

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18 Oct 2005, 21:28
Go with D on this one. If moartagage interest dropped, more people can afford.
VP
Joined: 13 Jun 2004
Posts: 1115
Location: London, UK
Schools: Tuck'08

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18 Oct 2005, 22:00
same idea. D too.
Senior Manager
Joined: 15 Apr 2005
Posts: 415
Location: India, Chennai
Re: CR: Some math.... Millington [#permalink]

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18 Oct 2005, 22:40
vikramm wrote:
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.

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.
Director
Joined: 14 Sep 2005
Posts: 985
Location: South Korea

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19 Oct 2005, 03:39
One more (D).

Low interest rates means more borrowing.
Even if I have incomes below median, I can borrow money and buy the house.
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Auge um Auge, Zahn um Zahn !

Senior Manager
Joined: 30 Oct 2004
Posts: 284

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19 Oct 2005, 05:02
OA is D.
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-Vikram

Current Student
Joined: 29 Jan 2005
Posts: 5218

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19 Oct 2005, 09:42
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.
SVP
Joined: 16 Oct 2003
Posts: 1801

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19 Oct 2005, 21:52
Got D as well.
Director
Joined: 09 Jul 2005
Posts: 591

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20 Oct 2005, 12:52
D seems to me as well
SVP
Joined: 28 May 2005
Posts: 1705
Location: Dhaka

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20 Oct 2005, 13:03
Only D reduces the cost.
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hey ya......

20 Oct 2005, 13:03
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