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MetroBank made loans to ten small companies

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MetroBank made loans to ten small companies  [#permalink]

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New post 16 Jul 2017, 09:31
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88% (01:41) correct 12% (01:50) wrong based on 69 sessions

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MetroBank made loans to ten small companies, in amounts ranging from $1,000 to $100,000. These ten loans all had graduated payment plans, i.e., the scheduled monthly loan payment increased slightly each month over the five-year term of the loan. Nonetheless, the average payment received by MetroBank for these ten loans had decreased by the end of the five-year term.

Which one of the following, if true, most helps to resolve the apparent discrepancy in the statements above?

(A) The number of small companies receiving new loans from MetroBank increased over the five-year term.

(B) Several of the ten small companies also borrowed money from other banks.

(C) Most banks offer a greater number of loans for under $100,000 than for over $100,000.

(D) Of the ten small companies, the three that had borrowed the largest amounts paid off their loans within three years.

(E) For some loans made by MetroBank, the monthly payment decreases slightly over the term of the loan.

Kudos :)

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Re: MetroBank made loans to ten small companies  [#permalink]

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New post 16 Jul 2017, 10:04
Akela wrote:
MetroBank made loans to ten small companies, in amounts ranging from $1,000 to $100,000. These ten loans all had graduated payment plans, i.e., the scheduled monthly loan payment increased slightly each month over the five-year term of the loan. Nonetheless, the average payment received by MetroBank for these ten loans had decreased by the end of the five-year term.

Which one of the following, if true, most helps to resolve the apparent discrepancy in the statements above?

(A) The number of small companies receiving new loans from MetroBank increased over the five-year term.

(B) Several of the ten small companies also borrowed money from other banks.

(C) Most banks offer a greater number of loans for under $100,000 than for over $100,000.

(D) Of the ten small companies, the three that had borrowed the largest amounts paid off their loans within three years.

(E) For some loans made by MetroBank, the monthly payment decreases slightly over the term of the loan.

Kudos :)


As the loan payment decreased despite the loans being under graduate payment plans and assuming that there are no defaults, it can be concluded that initial payments must have been proportionately higher leaving small outstanding amount. And because the outstanding amount is smaller than the actual loan disbursal, subsequent payments will further reduce the outstanding amount.

(A) The number of small companies receiving new loans from MetroBank increased over the five-year term.----Irrelevant information. No impact on reducing payments

(B) Several of the ten small companies also borrowed money from other banks.----Irrelevant information. No impact on reducing payments

(C) Most banks offer a greater number of loans for under $100,000 than for over $100,000.----The argument does not mention anything about loans over $100,000

(D) Of the ten small companies, the three that had borrowed the largest amounts paid off their loans within three years.------Correct and in line with our pre-thinking. if the largest loan amounts are already paid then obviously only small amount will be left for repayment reducing the subsequent payments

(E) For some loans made by MetroBank, the monthly payment decreases slightly over the term of the loan.The argument does not mention anything about monthly payment

Option D
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Re: MetroBank made loans to ten small companies  [#permalink]

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New post 16 Jul 2017, 13:48
The argument talks about loans given by Metro Bank to small companies, which have to paid back as
graduated payment plans - monthly payment plans (i.e)payments made such that the monthly loan
payments increase slightly over every month.

But, the average payment at the end of the five year term during which these payments have to be made,
decrease. In order to resolve the discrepancy, we need an alternate explanation to prove the reason for the decrease.
Option D(Of the ten small companies, the three that had borrowed the largest amounts paid off their loans within three years)
is a valid reason which could have caused the decrease in the amount collected at the end of the five-year term plan.
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Re: MetroBank made loans to ten small companies   [#permalink] 16 Jul 2017, 13:48
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