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A person buys a share for $ 50 and sells it for $ 52 after

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A person buys a share for $ 50 and sells it for $ 52 after [#permalink] New post 11 Mar 2007, 05:23
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Hi there,

i have a question concerning the following DS problem:

A person buys a share for $ 50 and sells it for $ 52 after a year. What is the total profit made by him from the share?
(I) A company pays annual dividend
(II) The rate of dividend is 25%

Your Answer : E
Actual Answer : C

i think that the information given is not sufficient. II) states that the dividend is 25%, but fails to say if it is 25% of the purchase price. Do you agree with me?
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 [#permalink] New post 11 Mar 2007, 05:53
Hi,

Answer is C because statement II says that dividend is 25% but it doesnt state the period. It could be 6 monthly dividend @ 25% per 6 month, while statement I clarify that its annual dividend, hence answer is C, as you have to combine both.

regards,

Amardeep
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 [#permalink] New post 11 Mar 2007, 21:39
Amardeep Sharma wrote:
Hi,

Answer is C because statement II says that dividend is 25% but it doesnt state the period. It could be 6 monthly dividend @ 25% per 6 month, while statement I clarify that its annual dividend, hence answer is C, as you have to combine both.

regards,

Amardeep


I think..Ppetkov has a valid point here..

Annual dividend is 25%. Agreed. But 25% of what? $50 need not be the basis for calculation. Dividend is calculated on initial offer price. $50 need not be that price. Hence, E can be the answer.
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 [#permalink] New post 11 Mar 2007, 21:48
yes, technically dividends are given on face value rather than market price of the share.... you have the valid point, but it looks out of scope of the GMAT question... I dont know how to treat it... can someone throw light on this?

regards,

Amardeep
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 [#permalink] New post 12 Mar 2007, 10:46
All I know is I would love to have a share that pays a 25 percent dividend with 4 percent annual capital gains...forget about the answer!
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 [#permalink] New post 12 Mar 2007, 12:15
heh, it probably depends on your tax status, my friend.
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 [#permalink] New post 12 Mar 2007, 23:21
It was different, when I was in India... but here in middle-east we dont have to pay taxes :-D :-D isnt that sound interesting

regards,

Amardeep
  [#permalink] 12 Mar 2007, 23:21
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A person buys a share for $ 50 and sells it for $ 52 after

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