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Posts: 5
Updated on: 12 Jun 2024, 00:46
Originally posted by amirsalehi on 23 Aug 2014, 10:09.
Last edited by Bunuel on 12 Jun 2024, 00:46, edited 10 times in total.
Last edited by Bunuel on 12 Jun 2024, 00:46, edited 10 times in total.
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
25%
(medium)
Question Stats:
82% (02:26) correct
18%
(02:48)
wrong
based on 2446
sessions
History
Date
Time
Result
Not Attempted Yet
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.
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
|
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 |
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Posts: 50
wadbarzain
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
General Discussion
Schools: Stanford '17
Posts: 4
amirsalehi
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
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
Option 2:Amount remaining after 1 year = 194000-(12*1775) = 172700
Posted from my mobile device
TheNightKing
Joined: 18 Dec 2017
Last visit: 20 Mar 2024
Posts: 1,119
Location: United States (KS)
GMAT 1: 600 Q46 V27
GMAT 1: 600 Q46 V27
Posts: 1,119
Quote:
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.
Hi, one doubt. Why didn't we include refinance fees in the principal as mentioned in the question for Offer2?
ishitaz
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 -
Quote:
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.
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
Offer 2: Amount remaining after 1 year = 194000-4000-(12*1775) = 168700
Posted from my mobile device
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.
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.
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.
surya4
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