goodyear2013 wrote:

Mr. Odusote owns two kinds of stock shares: r shares of stock X and r shares of stock Y. Stock X yields an annual dividend or 2%, while stock Y yields an annual dividend or 6%. If Mr. Odusote were to sell all or his shares of stock X and use that money to purchase shares of stock Y, by what percent would his annual dividend increase?

(1) Each share of stock X costs twice as much as each share of stock Y.

(2) Each share of stock Y costs $45.

Dear

goodyear2013,

I'm happy to help.

You may find this blog article germane to this problem:

http://magoosh.com/gmat/2013/gmat-quant ... oportions/Statement #1:

Suppose each share of Y costs P, so each share of X costs 2P.

Right now

from X, a dividend of (0.02)*r(2P) = (0.04)*rP

from Y, a dividend of (0.06)*rP

thus, a total dividend of (0.10)*rP

Selling r share of X would allow Mr. Odusote to purchase 2r shares of Y, for a total cache of 3r shares of Y

Then,

dividend = (0.06)*(3r)P = (0.18)*rP

The percent change from (0.10)*rP to (0.18)*rP would be the same as the percent change from 10 to 18. That's an 80% increase. We can calculate an answer from this. This statement, alone and by itself, is

sufficient.

Statement #2:

Now, we know the actual price of a share of Y, but we have absolutely no clue about the price of X or even whether it is greater or less than X. This statement, alone and by itself, is

insufficient.

Answer =

(A)Does all this make sense?

Mike

_________________

Mike McGarry

Magoosh Test Prep