Q3 - MetroBank made loans to ten

[ohthatpatrick]

Question Type:
Explain Discrepancy

Stimulus Breakdown:
Ten loans, ranging from 1k to 100k. Each loan has a higher payment each month over the 5 year term of the loan. YET, the average payment on these loans was lower towards the end of the 5 years.

Answer Anticipation:
GIVEN THAT each loan's monthly payment would be higher each month,
HOW CAN IT BE THAT towards the end of the five years, the average payment had gone down?
(normally we don't need to try to predict how they'll resolve a paradox, but it seems like this one only works if some of the higher value loans were paid off in advance of the 5-year deadline)

Correct Answer:
D

Answer Choice Analysis:
(A) The paradox is only about these ten loans, so other loans are irrelvant.

(B) Again, this introduces other loans, when we only care about the ten described.

(C) Don't care about most banks, nor do I care about loans beyond 100k, since we only care about the ten loans described in the stimulus.

(D) Here we go! Once you're no longer getting payment on the big loans (which would have the highest monthly payments), then your average monthly payment will be lower than it was.

(E) Cool, but it doesn't decrease for THESE loans, and those are the ones we care about.

Takeaway/Pattern: Only one of the five answers actually addressed the content of the paradox (the ten loans between 1k and 100k), so this was a really easy question, except for the fact that understanding how it works mathematically will be a challenge to more math-phobic LSAT students.

#officialexplanation

[Raiderblue17]

Can somebody give me an explanation on how to tackle this question. I know its a resolve the paradox according to the LRB.

[timmydoeslsat]

Sure thing.

This is a resolve the paradox question. We want an answer choice that shows how this paradox can exist.

The paradox in this case is that MetroBank made loans to 10 small companies. All of the 10 loans had graduated payments, which means that the payment required is increased each month. MetroBank increased the payments it wanted by just a little each month. These loans were given on a 5-year term.

The paradox we are told is that the average payment received by the bank for these ten loans DECREASED by the end of the five year term.

At first, we would expect that since the graduated payment each month slightly increases, the average payment would have increased at the end of the five years.

It can be helpful to think about some hypotheticals that can explain this before we look at the answer choices.

I thought maybe a lot of the companies paid off the loan really quickly and it affected the average payment in that five year span.

Answer choices:

A) We only care about these 10 small companies in the stimulus. We are talking about their loans. Other companies do not matter.

B) We only care about MetroBank and the loans it gave to these 10 small companies.

C) Most banks? We only care about MetroBank.

D) Looks good. Of these 10 small companies, the large that borrowed the largest amount paid them off within 3 years of the 5 year term. That can explain why the average payment went down. Those companies with the bigger loans paid more than they were required and paid off the loans sooner.

E) This does not concern us. All of the loans in our stimulus were graduated. They did not decrease at all.