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Samantha invests i1 dollars in bond X, which pays r1 [#permalink]
02 Oct 2010, 10:56

2

This post was BOOKMARKED

00:00

A

B

C

D

E

Difficulty:

45% (medium)

Question Stats:

55% (02:18) correct
45% (01:21) wrong based on 116 sessions

Samantha invests i1 dollars in bond X, which pays r1 percent simple interest annually, and she invests i2 dollars in bond Y, which pays r2 percent simple interest annually. After one year, will she have earned more interest, in dollars, from bond X than from bond Y ?

(1) (r1)^2 > (r2)^2 (2) The ratio of i1 to i2 is larger than the ratio of r1 to r2 .

Why cant 1 be sufficient . We know that interest cannot be negative , therefore (1) eventually leads to r1> r2 . The values of i1 and I2 don’t matter , because even when i2 is greater than i1 , the interest would be less .Eg. i1 : 100 r1: 5% , i2: 150 , r2: 3% , i1r1 > i2r2 giving the required result .

Re: GMAT Club Test -MGMAT Challenge Test 1- DS Question(#5) [#permalink]
02 Oct 2010, 11:11

nandini11 wrote:

Samantha invests i1 dollars in bond X , which pays r1 percent simple interest annually, and she invests i2 dollars in bond Y , which pays r2 percent simple interest annually. After one year, will she have earned more interest, in dollars, from bond X than from bond Y ? 1. (r1)^2 > (r2)^2 2. The ratio of i1 to i2 is larger than the ratio of r1 to r2 .

Why cant 1 be sufficient . We know that interest cannot be negative , therefore (1) eventually leads to r1> r2 . The values of i1 and I2 don’t matter , because even when i2 is greater than i1 , the interest would be less .Eg. i1 : 100 r1: 5% , i2: 150 , r2: 3% , i1r1 > i2r2 giving the required result .

OA

Well..i think the answer is E. Because in bonds the interest can be -ve and a variable one.

Re: GMAT Club Test -MGMAT Challenge Test 1- DS Question(#5) [#permalink]
02 Oct 2010, 11:33

nandini11 wrote:

Samantha invests i1 dollars in bond X , which pays r1 percent simple interest annually, and she invests i2 dollars in bond Y , which pays r2 percent simple interest annually. After one year, will she have earned more interest, in dollars, from bond X than from bond Y ? 1. (r1)^2 > (r2)^2 2. The ratio of i1 to i2 is larger than the ratio of r1 to r2 .

Why cant 1 be sufficient . We know that interest cannot be negative , therefore (1) eventually leads to r1> r2 . The values of i1 and I2 don’t matter , because even when i2 is greater than i1 , the interest would be less .Eg. i1 : 100 r1: 5% , i2: 150 , r2: 3% , i1r1 > i2r2 giving the required result .

OA

Interest from bond X : i1*r1/100 Interest from bond Y : i2*r2/100 we need to know if i1*r1 > i2*r2 ?

(1) r1^2 > r2^2 ... Not sufficient as it doesn't tell us anything about the actual amounts invested (2) i1/i2 > r1/r2 which implies i1*r2 > i2*r1 ... doesnt help us solve our inequality (1+2) r1^2 > r2^2 So r1 > r2 as interest rate on bond cannot be negative i1*r1 > i1*r2 i2*r1 > i2*r2 Combining with condition known from Statement 2, we get i1*r1 > i2*r2

Answer is (C)

sibanmishra wrote:

Well..i think the answer is E. Because in bonds the interest can be -ve and a variable one.

Bonds can't have negative interest. Variable is irrelevant here as we are given it is fixed _________________

Re: GMAT Club Test -MGMAT Challenge Test 1- DS Question(#5) [#permalink]
02 Oct 2010, 11:46

gurpreetsingh wrote:

First of all recheck the OA - it is C not E. Pls do not mislead people by posting wrong OA.

Sorry about that. i have not been through OG quant. So dint have any idea about the answer. I thought its E, cos i know that bond rates can be -ve when it's in loss. If you don't consider this fact, then the answer becomes C. So, i think it is assumed that the interest is always positive.M i right??

Re: GMAT Club Test -MGMAT Challenge Test 1- DS Question(#5) [#permalink]
02 Oct 2010, 12:03

sibanmishra wrote:

gurpreetsingh wrote:

First of all recheck the OA - it is C not E. Pls do not mislead people by posting wrong OA.

Sorry about that. i have not been through OG quant. So dint have any idea about the answer. I thought its E, cos i know that bond rates can be -ve when it's in loss. If you don't consider this fact, then the answer becomes C. So, i think it is assumed that the interest is always positive.M i right??

Re: GMAT Club Test -MGMAT Challenge Test 1- DS Question(#5) [#permalink]
02 Oct 2010, 12:24

1

This post received KUDOS

Expert's post

nandini11 wrote:

Samantha invests i1 dollars in bond X , which pays r1 percent simple interest annually, and she invests i2 dollars in bond Y , which pays r2 percent simple interest annually. After one year, will she have earned more interest, in dollars, from bond X than from bond Y ? 1. (r1)^2 > (r2)^2 2. The ratio of i1 to i2 is larger than the ratio of r1 to r2 .

Why cant 1 be sufficient . We know that interest cannot be negative , therefore (1) eventually leads to r1> r2 . The values of i1 and I2 don’t matter , because even when i2 is greater than i1 , the interest would be less .Eg. i1 : 100 r1: 5% , i2: 150 , r2: 3% , i1r1 > i2r2 giving the required result .

OA

First of all: "bond X pays r1 percent simple interest annually" --> so r1 and r2 can not be negative.

After 1 year bond X will earn i_1*\frac{r_1}{100} and bond Y i_2*\frac{r_2}{100}.

So the question is i_1*\frac{r_1}{100}>i_2*\frac{r_2}{100}? --> is i_1*r_1>i_2*r_2?

(1) (r_1)^2>(r_2)^2 --> not sufficient as no info about i_1 and i_2. (2) The ratio of i1 to i2 is larger than the ratio of r1 to r2 --> \frac{i_1}{i_2}>\frac{r_1}{r_2} --> i_1*r_2>i_2*r_1. Not sufficient.

(1)+(2) From (1) (r_1)^2>(r_2)^2 --> r_1>r_2 --> \frac{r_1}{r_2}>1 --> so \frac{i_1}{i_2}>\frac{r_1}{r_2}>1 --> \frac{i_1}{i_2}>1 --> i_1>i_2. So as both r_1>r_2 and i_1>i_2 then i_1*r_1>i_2*r_2. Sufficient.

Or: as both part in both inequalities ((r_1)^2>(r_2)^2 and i_1*r_2>i_2*r_1) are positive then we can multiply them: (r_1)^2*i_1*r_2>(r_2)^2*i_2*r_1 --> reduce by r_1r_2 --> i_1*r_1>i_2*r_2. Sufficient.

Re: GMAT Club Test -MGMAT Challenge Test 1- DS Question(#5) [#permalink]
02 Oct 2010, 12:33

Expert's post

sibanmishra wrote:

Well..No one till now commented on the possibility of negative interest rate??

There are comments on this in two posts above: we are told that "bond X pays r1 percent simple interest annually" so it can't be negative. _________________

Re: GMAT Club Test -MGMAT Challenge Test 1- DS Question(#5) [#permalink]
02 Oct 2010, 12:52

Hello Bunuel , Shrouded1 , What abt the following consideration . from (1) we know r1 > r2 so irrespective of i1 being greater or less than i2 , we would know that i1*r1 yields high value . Example Consider i1 > i2 (and we know r1 >r2 and i1 and i2 have to be positive values ). say i1 : 150 , i2 : 100 Value of Inv on X : i1*r1 : 150*5% : 7.5 Value of Inv on Y : i2*r2 : 100*3% : 3 Therefore X > Y Take the other case of i1< i2 ( and still r1 >r2 and i1 and i2 have to be positive values ). Say i1 : 100 , i2 : 150 Value of Inv on X : i1*r1 : 100*5% : 5 Value of Inv on Y : i2*r2 : 150*3% : 4.5 So it does not matter what is the principle amount hence (A) or stmnt 1 is sufficient . Where am I going wrong ?

PS : Gurpreet I have corrected the OA .Sorry abt that .

Re: GMAT Club Test -MGMAT Challenge Test 1- DS Question(#5) [#permalink]
02 Oct 2010, 13:05

Expert's post

nandini11 wrote:

Hello Bunuel , Shrouded1 , What abt the following consideration . from (1) we know r1 > r2 so irrespective of i1 being greater or less than i2 , we would know that i1*r1 yields high value . Example Consider i1 > i2 (and we know r1 >r2 and i1 and i2 have to be positive values ). say i1 : 150 , i2 : 100 Value of Inv on X : i1*r1 : 150*5% : 7.5 Value of Inv on Y : i2*r2 : 100*3% : 3 Therefore X > Y Take the other case of i1< i2 ( and still r1 >r2 and i1 and i2 have to be positive values ). Say i1 : 100 , i2 : 150 Value of Inv on X : i1*r1 : 100*5% : 5 Value of Inv on Y : i2*r2 : 150*3% : 4.5 So it does not matter what is the principle amount hence (A) or stmnt 1 is sufficient . Where am I going wrong ?

PS : Gurpreet I have corrected the OA .Sorry abt that .

That's not correct. Are you saying that interest earned depends only on interest rate?

So if I ask you what would you prefer 1% annual interest from $1,000,000,000 or 100% annual interest from $1? _________________

Re: GMAT Club Test -MGMAT Challenge Test 1- DS Question(#5) [#permalink]
02 Oct 2010, 13:38

nandini11 wrote:

Hello Bunuel , Shrouded1 , What abt the following consideration . from (1) we know r1 > r2 so irrespective of i1 being greater or less than i2 , we would know that i1*r1 yields high value . Example Consider i1 > i2 (and we know r1 >r2 and i1 and i2 have to be positive values ). say i1 : 150 , i2 : 100 Value of Inv on X : i1*r1 : 150*5% : 7.5 Value of Inv on Y : i2*r2 : 100*3% : 3 Therefore X > Y Take the other case of i1< i2 ( and still r1 >r2 and i1 and i2 have to be positive values ). Say i1 : 100 , i2 : 150 Value of Inv on X : i1*r1 : 100*5% : 5 Value of Inv on Y : i2*r2 : 150*3% : 4.5 So it does not matter what is the principle amount hence (A) or stmnt 1 is sufficient . Where am I going wrong ?

PS : Gurpreet I have corrected the OA .Sorry abt that .

Nandini, the numbers you have taken in this particular case are playing the trick. In your example, the ratio of the R's and I's are peculiar.

Take extreme example. If you think i1 & i2 do not matter. Do this:

Case 1 i1=$10000 and i2=$100 r1=5% and r2=4.99% .. as a result r1>r2 Value of return ......... X = 10000*5% = $500 Y = 100*4.99% = $4.99 X >> Y

Case 2 i1=$100 and i2=$10000 r1=5% and r2=4.99% .. as a result r1>r2 Value of return ......... X = 100*5% = $5 Y = 10000*4.99% = $499 X << Y _________________

Re: GMAT Club Test -MGMAT Challenge Test 1- DS Question(#5) [#permalink]
11 Nov 2013, 12:59

Bunuel wrote:

nandini11 wrote:

Samantha invests i1 dollars in bond X , which pays r1 percent simple interest annually, and she invests i2 dollars in bond Y , which pays r2 percent simple interest annually. After one year, will she have earned more interest, in dollars, from bond X than from bond Y ? 1. (r1)^2 > (r2)^2 2. The ratio of i1 to i2 is larger than the ratio of r1 to r2 .

Why cant 1 be sufficient . We know that interest cannot be negative , therefore (1) eventually leads to r1> r2 . The values of i1 and I2 don’t matter , because even when i2 is greater than i1 , the interest would be less .Eg. i1 : 100 r1: 5% , i2: 150 , r2: 3% , i1r1 > i2r2 giving the required result .

OA

First of all: "bond X pays r1 percent simple interest annually" --> so r1 and r2 can not be negative.

After 1 year bond X will earn i_1*\frac{r_1}{100} and bond Y i_2*\frac{r_2}{100}.

So the question is i_1*\frac{r_1}{100}>i_2*\frac{r_2}{100}? --> is i_1*r_1>i_2*r_2?

(1) (r_1)^2>(r_2)^2 --> not sufficient as no info about i_1 and i_2. (2) The ratio of i1 to i2 is larger than the ratio of r1 to r2 --> \frac{i_1}{i_2}>\frac{r_1}{r_2} --> i_1*r_2>i_2*r_1. Not sufficient.

(1)+(2) From (1) (r_1)^2>(r_2)^2 --> r_1>r_2 --> \frac{r_1}{r_2}>1 --> so \frac{i_1}{i_2}>\frac{r_1}{r_2}>1 --> \frac{i_1}{i_2}>1 --> i_1>i_2. So as both r_1>r_2 and i_1>i_2 then i_1*r_1>i_2*r_2. Sufficient.

Or: as both part in both inequalities ((r_1)^2>(r_2)^2 and i_1*r_2>i_2*r_1) are positive then we can multiply them: (r_1)^2*i_1*r_2>(r_2)^2*i_2*r_1 --> reduce by r_1r_2 --> i_1*r_1>i_2*r_2. Sufficient.

Answer: C.

Bunuel: Can you please explain - (2) The ratio of i1 to i2 is larger than the ratio of r1 to r2 --> \frac{i_1}{i_2}>\frac{r_1}{r_2} --> i_1*r_2>i_2*r_1. Not sufficient.

Re: Samantha invests i1 dollars in bond X, which pays r1 [#permalink]
14 Apr 2014, 08:48

Read to eat stuff: it will refresh your concept and keep you away from any confusion during exam. Kudos me if it is helpful.

Attachment:

Ratio properties.jpg [ 81.01 KiB | Viewed 281 times ]

_________________

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Re: Samantha invests i1 dollars in bond X, which pays r1
[#permalink]
14 Apr 2014, 08:48