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# Jim needs \$1,000 to buy a new flat-screen TV. Since he has

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Intern
Joined: 09 Sep 2013
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Jim needs \$1,000 to buy a new flat-screen TV. Since he has [#permalink]

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09 Sep 2013, 02:29
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Question Stats:

91% (02:50) correct 9% (02:07) wrong based on 267 sessions

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Jim needs \$1,000 to buy a new flat-screen TV. Since he has only \$7, he borrows the remaining balance from his sister Mary. The loan will be repaid in 3 annual installments at an interest rate of 10%, compounded annually. The formula for calculating the monthly payment P is P = (L x C x r) / (C – 1) where L = amount of the loan, r = annual interest rate, and C = compounding factor = (1 + r)^N where N = number of annual payments. How much does Jim have to pay Mary at the end of each of the next 3 years (rounded to the nearest penny)?

A. \$357.67
B. \$375.85
C. \$387.40
D. \$399.30
E. \$433.33

Any idea how to solve this ?

Last edited by Bunuel on 09 Sep 2013, 03:11, edited 1 time in total.
Renamed the topic, edited the question and moved to PS forum.

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Manager
Joined: 23 May 2013
Posts: 122

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Re: Jim needs \$1,000 to buy a new flat-screen TV. Since he has [#permalink]

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09 Sep 2013, 05:20
1
KUDOS
BugDGmat wrote:
Jim needs \$1,000 to buy a new flat-screen TV. Since he has only \$7, he borrows the remaining balance from his sister Mary. The loan will be repaid in 3 annual installments at an interest rate of 10%, compounded annually. The formula for calculating the monthly payment P is P = (L x C x r) / (C – 1) where L = amount of the loan, r = annual interest rate, and C = compounding factor = (1 + r)^N where N = number of annual payments. How much does Jim have to pay Mary at the end of each of the next 3 years (rounded to the nearest penny)?

A. \$357.67
B. \$375.85
C. \$387.40
D. \$399.30
E. \$433.33

Any idea how to solve this ?

L = 993
r = 0.1
C = 1.1^3 = 1.331
Insert all of these in the formula and we get
P = 993*1.331*0.1/0.331

In order to resolve above without a calc, we need to find the approx value of 0.1331/0.331 ~ 0.4~
~ 993*0.4
~ 397

Answer D should be the one.
_________________

“Confidence comes not from always being right but from not fearing to be wrong.”

Kudos [?]: 68 [1], given: 110

Math Expert
Joined: 02 Sep 2009
Posts: 42249

Kudos [?]: 132626 [0], given: 12326

Re: Jim needs \$1,000 to buy a new flat-screen TV. Since he has [#permalink]

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10 Sep 2013, 01:22
BugDGmat wrote:
Jim needs \$1,000 to buy a new flat-screen TV. Since he has only \$7, he borrows the remaining balance from his sister Mary. The loan will be repaid in 3 annual installments at an interest rate of 10%, compounded annually. The formula for calculating the monthly payment P is P = (L x C x r) / (C – 1) where L = amount of the loan, r = annual interest rate, and C = compounding factor = (1 + r)^N where N = number of annual payments. How much does Jim have to pay Mary at the end of each of the next 3 years (rounded to the nearest penny)?

A. \$357.67
B. \$375.85
C. \$387.40
D. \$399.30
E. \$433.33

Any idea how to solve this ?

Similar question to practice: louie-takes-out-a-three-month-loan-of-1000-the-lender-101506.html
_________________

Kudos [?]: 132626 [0], given: 12326

Intern
Joined: 02 Jan 2016
Posts: 2

Kudos [?]: 6 [0], given: 2

Location: United States
Concentration: Finance, General Management
GPA: 3.81
WE: Information Technology (Computer Software)
Re: Jim needs \$1,000 to buy a new flat-screen TV. Since he has [#permalink]

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07 May 2016, 14:01
BugDGmat wrote:
Jim needs \$1,000 to buy a new flat-screen TV. Since he has only \$7, he borrows the remaining balance from his sister Mary. The loan will be repaid in 3 annual installments at an interest rate of 10%, compounded annually. The formula for calculating the monthly payment P is P = (L x C x r) / (C – 1) where L = amount of the loan, r = annual interest rate, and C = compounding factor = (1 + r)^N where N = number of annual payments. How much does Jim have to pay Mary at the end of each of the next 3 years (rounded to the nearest penny)?

A. \$357.67
B. \$375.85
C. \$387.40
D. \$399.30
E. \$433.33

Any idea how to solve this ?

EMI can be calculated by the formula

EMI = (P* R) /[1 - (100/100+R)^n]

Where P is principal, R is interest, n is number of installments.

In this case,

EMI = (993 *10/100)/[1-(10000/11000)^3] = (99.30)/[1 - (1000/1331)] =99.30/331/1331 = 1331*0.3 = 399.30

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Intern
Joined: 03 Jun 2017
Posts: 15

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Re: Jim needs \$1,000 to buy a new flat-screen TV. Since he has [#permalink]

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25 Jun 2017, 09:24
Hi Bunuel
here, should we take C=(1+r)^2.... or ^3??
In the link a similar problem for 3 months, we did not consider the interest for the last month...

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Intern
Joined: 03 Jun 2017
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Re: Jim needs \$1,000 to buy a new flat-screen TV. Since he has [#permalink]

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25 Jun 2017, 09:29
As per Ganesh raja
we can use the formula, but why have they given in the question as to what formula to be used to calculate the same?

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Manager
Joined: 27 Aug 2014
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Re: Jim needs \$1,000 to buy a new flat-screen TV. Since he has [#permalink]

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04 Oct 2017, 01:38
Bunuel wrote:
BugDGmat wrote:
Jim needs \$1,000 to buy a new flat-screen TV. Since he has only \$7, he borrows the remaining balance from his sister Mary. The loan will be repaid in 3 annual installments at an interest rate of 10%, compounded annually. The formula for calculating the monthly payment P is P = (L x C x r) / (C – 1) where L = amount of the loan, r = annual interest rate, and C = compounding factor = (1 + r)^N where N = number of annual payments. How much does Jim have to pay Mary at the end of each of the next 3 years (rounded to the nearest penny)?

A. \$357.67
B. \$375.85
C. \$387.40
D. \$399.30
E. \$433.33

Any idea how to solve this ?

Hi Bunuel
I think there is an error in the question. The formula gives monthly payment but question asks for annual payment. Pls explain.

Similar question to practice: http://gmatclub.com/forum/louie-takes-o ... 01506.html

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Re: Jim needs \$1,000 to buy a new flat-screen TV. Since he has   [#permalink] 04 Oct 2017, 01:38
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