When rate of inflation > rate of return on most profitable investment available, difference between two rates will be minimum percentage by which value of any investment will decline.
Which one of the following logically completes the argument?
(A) the rate of inflation has risen
- cant' conclude if A is the cause without knowing if rate of return has increased propotinately
(B) the investment in question is becoming less profitable
- definitely not.
(C) the investment in question is less profitable than the most profitable investment available
(D) the rate of return on the most profitable investment available has declined
- same problem with A
(E) there has been a change in which particular investment happens to be the most profitable available
- out of scoep
Going with C on this one. We know only for sure that the investment in question is goign to be less profitable than the most profitable investment since the percetage drop in value went below the minimum level
Can this be explained with numbers?
Say Inflation Rate be 10%;
Rate of return on most profitable investment be 8%.
Difference between Inflation and most profitable investment rate = 2%.
Rate of return of investment in question = 7%(less than most profitable investment).
Expected investment return after decline from our difference of Inflation rate and most profitable investment rate = 7%-2%(10%-8%)=5%.
Now, question asks for scenario in which our final rate in above line is less than 5%. How can C define that when it is obvious as per provided facts(any other investment other than most profitable investment)?
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