navderm
Can someone please point out what I am missing.
1. 7 students can be arranged in 7! ways.
2. There are 2 possible arrangements for the three students 132 and 312.
There are 8 places where they can go now. Choose 3 by 8C3.
Arrange them by 2.
So, 7! * 8C3 * 2 = 564480
I think you are making an assumption that the three students need to get in immediately next to each other, other students can get into the bus in between S1-S3, S3-S2 or S1-S2.
Overall, student 2 can take any place starting from 3 to 10
Given below are S2 positions -> corresponding combinations to seat S1 & S3 (Multiplied by 2 is used because their positions are interchangeable)
S2=3 -> S1, S3 = 2C2 * 2 = 2
S2=4 -> S1, S3 = 3C2 * 2 = 6
S2=5 -> S1, S3 = 4C2 * 2 = 12
S2=6 -> S1, S3 = 5C2 * 2 = 20
S2=7 -> S1, S3 = 6C2 * 2 = 30
S2=8 -> S1, S3 = 7C2 * 2 = 42
S2=9 -> S1, S3 = 8C2 * 2 = 56
S2=10 -> S1, S3 = 9C2 * 2 = 72
Total positions for S1, S3 = 240
in each of these 240 positions, other 7 kids can be seated in 7! ways
240*7! = 12,09,600
That's option C
Of course, doesn't look like one can solve this within 2 minutes.

Let me know if you have a different approach.