Radhika is refinancing a business loan and is considering 2 different

Question

Radhika is refinancing a business loan and is considering 2 different loan offers. Under Offer 1, the loan’s initial principal would be $190,000, and she would pay down $1,250 in principal with each monthly payment during the first year of the loan. Under Offer 2, $4,000 in refinancing fees would be added to bring the principal to $194,000, but she would pay down $1,775 in principal with each monthly payment during the first year of the loan.

In the first column of the table, select the amount of principal that would remain after 12 monthly payments under Offer 1. In the second column of the table, select the amount of principal that would remain after 12 monthly payments under Offer 2. Make only two selections, one in each column.

ID: 100322

Shrivathsan · Accepted Answer

Pretty simple Q.
Offer 1 :
 P=1250 ; months : 12 ; amount to repay : 190000
amount remain after 12 months.
190000-(12*1250) = 175000

Offer 2 :
 P=1775; months : 12 ; amount to repay : 194000
amount remain after 12 months.
194000-(12*1775) = 172700

--------------------------------
Shrivathsan

marciful · Answer

Offer 1 Offer 2
190,000 Principal 194,000
 1,250 Monthly Principal Payments 1,775
15,000 Total Principal Payments after Year 1 21,300
175,000 Principal remaining after Year 1 172,700

Apt0810 · Answer

Option 1: Amount remaining after 1 year = 190000-(12*1250) = 175000

Option 2:Amount remaining after 1 year = 194000-(12*1775) = 172700

Posted from my mobile device

TheNightKing · Answer

Offer 1 :
Principal Amount = 1,90,000
Per Month = 1250
12 Months = 12*1250=12500+2500=15000
Balance = 190000-15000 = 175000

Offer 2 :
Principal Amount = 1,94,000
Per Month = 1775
12 Months = 12*1775=17750+3550=21,300
Balance = 194000-21300 = 1,72,700

So Option D and option C.

ishitaz · Answer

Hi, one doubt. Why didn't we include refinance fees in the principal as mentioned in the question for Offer2?

Ansh13 · Answer

ishitaz  - The refinance fees is already added in the principal in Offer 2. The principal amount of $194,000 in Offer 2 is inclusive of the $4000 refinancing fees. The questions says - 
 
This means that the $4000 refinancing fees when added to the principal, brings the total value of principal to $194,000.

Hope that clears your doubt.

scranjith · Answer

Offer 1: Amount remaining after 1 year = 190000-(12*1250) = 175000

Offer 2: Amount remaining after 1 year = 194000-4000-(12*1775) = 168700

Posted from my mobile device

surya4 · Answer

Do you have any suggestions on how to reduce the time spent here? I can solve questions like this, but it's taking me around 3-4 minutes. The most significant part of the time is spent on comprehension.

cheshire · Answer

If your struggling with comprehension i would recommend when reading the prompt,  don’t aim to absorb every detail at once .

In this instance focus on these in your first pass:

-Initial Values - "The loans initial principal would be"

-Monthly Changes - "...she would pay down $X in principal with each monthly payment..."

-Extra conditions or agreements - "...$4,000 in refinancing fees would be added..."

After this, jot down simple variables (e.g., O1: 190k, -1250/mo; O2: 190k+4k, -1775/mo)
This helps lock in the structure of the question before getting distracted by options.

Also, memorize formulas so you can more quickly get into the math. In this case: Remaining=Initial principal−(monthly payment×12)
While it might seem simple to figure them out on a question by question basis, remembering them can streamline the solving process.

Principal remaining after 12 months under Offer 1	Principal remaining after 12 months under Offer 2	Amount
		$168,700
		$171,000
		$172,700
		$175,000
		$176,700
		$179,000

Radhika is refinancing a business loan and is considering 2 different

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Two-part Analysis (TPA) Questions

Radhika is refinancing a business loan and is considering 2 different

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards