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15 00:00

Difficulty:   45% (medium)

Question Stats: 66% (01:42) correct 34% (01:50) wrong based on 410 sessions

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Nathan took out a student loan for 1200$at 10 percent annual interest, compounded annually. If he did not repay any of the loan or interest during the first 3 years, which of the following is the closest to the amount of interest he owed for the 3 years. A. 360 B. 390 C. 400 D. 410 E. 420 _________________ Discipline does not mean control. Discipline means having the sense to do exactly what is needed. Math Expert V Joined: 02 Aug 2009 Posts: 7686 Re: Nathan took out a student loan for 1200$ at 10 percent annual interest  [#permalink]

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RSOHAL wrote:
Nathan took out a student loan for 1200$at 10 percent annual interest, compounded annually. If he did not repay any of the loan or interest during the first 3 years, which of the following is the closest to the amount of interest he owed for the 3 years. A. 360 B. 390 C. 400 D. 410 E. 420 a straight Qrequiring direct formulae.. when compounded annualy the final amount=P(1+ r/100)^n.. here P=1200, r=10 and n=3.. 1200(1+ 10/100)^3.. 1200*1.1^3=1597.2 interest =1597-1200=397, which is nearly 400 in the choices given ansC _________________ Manager  B Joined: 02 Aug 2013 Posts: 65 Location: India Concentration: Technology, Leadership WE: Programming (Consulting) Re: Nathan took out a student loan for 1200$ at 10 percent annual interest  [#permalink]

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1
1
CI = $$1200 * (1+\frac{10}{100})^3$$

= $$1200* (1.10)^3$$

= 1200 * 1.331

= 1597.2

Approx amount = 1597.2 - 1200 = 397.8 = 400 (approx)

Explanation

C.I = P * $$(1+\frac{r}{100*n})^nt$$

where,
P = principal amount
r = rate of Interest
n= number of times interest compounded
t = time period.

So, we have

n = 1200
r = 10
n = 1 (compounded annually)
t = 3 years.

Substitute above values in CI formula.

Ans: Option C
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Re: Nathan took out a student loan for 1200$at 10 percent annual interest [#permalink] ### Show Tags 1 RSOHAL wrote: Nathan took out a student loan for 1200$ at 10 percent annual interest, compounded annually. If he did not repay any of the loan or interest during the first 3 years, which of the following is the closest to the amount of interest he owed for the 3 years.

A. 360
B. 390
C. 400
D. 410
E. 420

Principal amount is : 1200
Total amount after
1st yr = 1200 x 1.1 = 1320
2nd yr = 1320 x 1,1 = 1452
3rd yr = 1452 x 1.1 = 1597.2

Amount of interest he owed after 3 years = 1597.2 - 1200 = 397.2 ....... The closest value is 400.

Correct Answer C

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RSOHAL wrote:
Nathan took out a student loan for 1200$at 10 percent annual interest, compounded annually. If he did not repay any of the loan or interest during the first 3 years, which of the following is the closest to the amount of interest he owed for the 3 years. A. 360 B. 390 C. 400 D. 410 E. 420 I did it this way: 1st year's interest: 10% of 1200=120, 2nd year's interest: 10% of 1320=132, ( here, 1320= 1200 +120), 3rd year's interest: 10% of 1452= 145.2 ( 1452= 1320+132) hence total interest= $$397.2\approx{400}$$ Intern  B Joined: 17 Jul 2017 Posts: 8 Re: Nathan took out a student loan for 1200$ at 10 percent annual interest  [#permalink]

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Question asked approximation so it is easy
Initial amount 1200 mean at year 1 end==120$(interest) Now amount 1320 mean at year 2 end==(120+132) now amount 1452 mean at year 3 end==(120+132+145.2) total=397.2 close to 400 Option C Intern  S Status: One more try Joined: 01 Feb 2015 Posts: 43 Location: India Concentration: General Management, Economics WE: Corporate Finance (Commercial Banking) Re: Nathan took out a student loan for 1200$ at 10 percent annual interest  [#permalink]

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RSOHAL wrote:
Nathan took out a student loan for 1200$at 10 percent annual interest, compounded annually. If he did not repay any of the loan or interest during the first 3 years, which of the following is the closest to the amount of interest he owed for the 3 years. A. 360 B. 390 C. 400 D. 410 E. 420 Closer to 400 than 390. I doubt whether these qstns do come in exam. _________________ Believe you can and you are halfway there-Theodore Roosevelt Manager  S Joined: 02 Aug 2017 Posts: 54 Concentration: Strategy, Nonprofit Schools: ISB '20 GPA: 3.71 Re: Nathan took out a student loan for 1200$ at 10 percent annual interest  [#permalink]

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RSOHAL wrote:
Nathan took out a student loan for 1200$at 10 percent annual interest, compounded annually. If he did not repay any of the loan or interest during the first 3 years, which of the following is the closest to the amount of interest he owed for the 3 years. A. 360 B. 390 C. 400 D. 410 E. 420 Please find the short calculation Posted from my mobile device Attachments 1533792018390970729514982243845.jpg [ 2.15 MiB | Viewed 1673 times ] _________________ Everything is in flux, nothing stays still MGMAT1 :590 Q42 V30 (07/07/18) VERITAS :660 Q48 V33 (16/07/18) GMATPREP1 :690 Q46 V36 (22/07/18) GMATPREP2 :740 Q51 V39 (06/08/18) ECONOMIST :740 Q49 V44 (11/08/18) KAPLAN :690 Q49 V36 (17/08/18) PRINCETON :690 Q48 V38 (26/08/18) MGMAT2 :720 Q43 V45 (02/09/18) Senior Manager  G Joined: 04 Aug 2010 Posts: 415 Schools: Dartmouth College Re: Nathan took out a student loan for 1200$ at 10 percent annual interest  [#permalink]

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RSOHAL wrote:
Nathan took out a student loan for 1200$at 10 percent annual interest, compounded annually. If he did not repay any of the loan or interest during the first 3 years, which of the following is the closest to the amount of interest he owed for the 3 years. A. 360 B. 390 C. 400 D. 410 E. 420 Since the 10% rate is compounded annually, the amount of interest increases by 10% each year: First-year interest = 10% of 1200 = 120. Second-year interest = (first-year interest) + 10% = 120 + 12 = 132. Third-year interest = (second-year interest) + 10% = 132 + 13.2 = 145.2. Total interest = 120 + 132 + 145.2 = 397.2. _________________ GMAT and GRE Tutor Over 1800 followers GMATGuruNY@gmail.com New York, NY If you find one of my posts helpful, please take a moment to click on the "Kudos" icon. Available for tutoring in NYC and long-distance. For more information, please email me at GMATGuruNY@gmail.com. Target Test Prep Representative D Status: Founder & CEO Affiliations: Target Test Prep Joined: 14 Oct 2015 Posts: 6239 Location: United States (CA) Re: Nathan took out a student loan for 1200$ at 10 percent annual interest  [#permalink]

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RSOHAL wrote:
Nathan took out a student loan for 1200$at 10 percent annual interest, compounded annually. If he did not repay any of the loan or interest during the first 3 years, which of the following is the closest to the amount of interest he owed for the 3 years. A. 360 B. 390 C. 400 D. 410 E. 420 We can use the annual compound interest formula: A = P(1 + r)^t. So we have: A = 1200(1 + 0.1)^3 A = 1200(1.1)^3 A = 1597.2 The amount of$1597.20 is the total amount (principal plus interest) he owes, so the amount of interest he owes is 1597.2 - 1200 = $397.2, or approximately$400.

Answer: C
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