by: WhiteTide
11 mins
by: WhiteTide
12 mins
Events & Promotions
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Posts: 13
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
95%
(hard)
Question Stats:
43% (01:55) correct
57%
(02:01)
wrong
based on 1472
sessions
History
Date
Time
Result
Not Attempted Yet
A large company has recently increased its dividend payments to shareholders. Shareholders had previously been worried about the company's stock price, but are now relieved since increasing dividends generally boosts a company's stock price. However, the shareholders' optimism may be ill-founded since spending money on the payment of dividends often indicates that the company has exhausted more lucrative investments for its cash reserves and that the stock price will likely fall in the longer run.
In the argument above, the two bold-faced portions play which of the following roles?
A. The first is evidence that supports a conclusion; the second is that conclusion
B. The first describes evidence that supports a conclusion; the second gives a reason for questioning that support.
C. The first describes the circumstance that the argument seeks to explain; the second provides evidence in support of the explanation that the argument seeks to establish.
D. The first is a premise that is accepted as true; the second is a conclusion that is contrary to the premise.
E. The first is a premise that is accepted as true; the second seeks to clarify the original premise.
In the argument above, the two bold-faced portions play which of the following roles?
A. The first is evidence that supports a conclusion; the second is that conclusion
B. The first describes evidence that supports a conclusion; the second gives a reason for questioning that support.
C. The first describes the circumstance that the argument seeks to explain; the second provides evidence in support of the explanation that the argument seeks to establish.
D. The first is a premise that is accepted as true; the second is a conclusion that is contrary to the premise.
E. The first is a premise that is accepted as true; the second seeks to clarify the original premise.
Posts: 13
Let's try to understand the structure of the argument:
Premise 1: the company has recently increased its dividend payments - Boldface 1 (BF1)
Intermediate conclusion: Shareholders are now relieved since increasing dividends generally boosts a company's stock price.
Premise 2: spending money on the payment of dividends often indicates that the company has exhausted more lucrative investments for its cash reserves and that the stock price will likely fall in the longer run - Boldface 2 (BF2)
Main Conclusion: The shareholders' optimism may be ill-founded.
Now let's look at the choices.
A: BF2 is not the conclusion that BF1 supports. Incorrect.
C: BF2 is the explanation itself, and not evidence that supports it.
D: BF2 does not contradict the given premise BF1
E: BF1 is the original premise - BF2 is not clarifying the premise itself. It is trying to explain why a conclusion made based on BF1 is possibly incorrect.
This leaves us with the right answer B.
Premise 1: the company has recently increased its dividend payments - Boldface 1 (BF1)
Intermediate conclusion: Shareholders are now relieved since increasing dividends generally boosts a company's stock price.
Premise 2: spending money on the payment of dividends often indicates that the company has exhausted more lucrative investments for its cash reserves and that the stock price will likely fall in the longer run - Boldface 2 (BF2)
Main Conclusion: The shareholders' optimism may be ill-founded.
Now let's look at the choices.
A: BF2 is not the conclusion that BF1 supports. Incorrect.
C: BF2 is the explanation itself, and not evidence that supports it.
D: BF2 does not contradict the given premise BF1
E: BF1 is the original premise - BF2 is not clarifying the premise itself. It is trying to explain why a conclusion made based on BF1 is possibly incorrect.
This leaves us with the right answer B.
General Discussion
B.The first describes evidence that supports a conclusion; the second gives a reason for questioning that support.
BF1 doesn't support the conclusion.
BF1 doesn't support the conclusion.
Why is B the right answer? In what universe does the fact in BF1 support the conclusion??
Can someone pls elaborate on this.
Can someone pls elaborate on this.
Posts: 131
hi pipe19,
let me try to answer you.
the first boldface(BF1) says company is giving more dividends. this a premise or "FACT". the argument says that share holders think that it is a good sign and stock prices are going to increase. this is the conclusion. the second premise(the whole line along with BF2) states that the conclusion might be wrong because it might be a last ditch effort.
let us look at the options
a) The first is evidence that supports a conclusion; the second is that conclusion
Wrong , the conclusion here is that which is drawn by shareholders. i.e. increasing evidence boosts the stock price. so the second boldface is not the conclusion.
b) The first describes evidence that supports a conclusion; the second gives a reason for questioning that support.
right answer, accurately describes the scenario.
c) The first describes the circumstance that the argument seeks to explain; the second provides evidence in support of the explanation that the argument seeks to establish.
the first is not a circumstance, it is evidence. the evidence is never explained, it is just taken to form a conclusion and later BF2 is given which questions the validity of the conclusion.
d) The first is a premise that is accepted as true; the second is a conclusion that is contrary to the premise.
the first part is true. the second is not the conclusion, it is another premise which gives an alternate explanation for the premise.
e) The first is a premise that is accepted as true; the second seeks to clarify the original premise.
the first part is right. the second does not clarify the premise, rather it tries to clarify the conclusion drawn from the premise.
hope this helps
_________________
let me try to answer you.
the first boldface(BF1) says company is giving more dividends. this a premise or "FACT". the argument says that share holders think that it is a good sign and stock prices are going to increase. this is the conclusion. the second premise(the whole line along with BF2) states that the conclusion might be wrong because it might be a last ditch effort.
let us look at the options
a) The first is evidence that supports a conclusion; the second is that conclusion
Wrong , the conclusion here is that which is drawn by shareholders. i.e. increasing evidence boosts the stock price. so the second boldface is not the conclusion.
b) The first describes evidence that supports a conclusion; the second gives a reason for questioning that support.
right answer, accurately describes the scenario.
c) The first describes the circumstance that the argument seeks to explain; the second provides evidence in support of the explanation that the argument seeks to establish.
the first is not a circumstance, it is evidence. the evidence is never explained, it is just taken to form a conclusion and later BF2 is given which questions the validity of the conclusion.
d) The first is a premise that is accepted as true; the second is a conclusion that is contrary to the premise.
the first part is true. the second is not the conclusion, it is another premise which gives an alternate explanation for the premise.
e) The first is a premise that is accepted as true; the second seeks to clarify the original premise.
the first part is right. the second does not clarify the premise, rather it tries to clarify the conclusion drawn from the premise.
hope this helps
_________________
this time, we play for keeps
I see what you mean. Because there is a stated connection between BF1 and a premise that supports a conclusion you can say that BF1 supports this conclusion. Thanks!
Quite similar to OG16 CR #105: https://gmatclub.com/forum/since-it-has-become-known-that-several-of-a-bank-s-top-executives-have-136001.html
Since it has become known that several of a bank’s top executives have been buying shares in their own bank, the bank’s depositors, who had been worried by rumors that the bank faced impending financial collapse, have been greatly relieved. They reason that, since top executives evidently have faith in the bank’s financial soundness, those worrisome rumors must be false. Such reasoning might well be overoptimistic, however, since corporate executives have been known to buy shares in their own company in a calculated attempt to dispel negative rumors about the company’s health.
In the argument given, the two boldfaced portions play which of the following roles?
(A) The first describes evidence that has been taken as supporting a conclusion; the second gives a reason for questioning that support.
(B) The first describes evidence that has been taken as supporting a conclusion; the second states a contrary conclusion that is the main conclusion of the argument.
(C) The first provides evidence in support of the main conclusion of the argument; the second states that conclusion.
(D) The first describes the circumstance that the argument as a whole seeks to explain; the second gives the explanation that the argument seeks to
establish.
(E) The first describes the circumstance that the argument as a whole seeks to explain; the second provides evidence in support of the explanation that the argument seeks to establish.
Since it has become known that several of a bank’s top executives have been buying shares in their own bank, the bank’s depositors, who had been worried by rumors that the bank faced impending financial collapse, have been greatly relieved. They reason that, since top executives evidently have faith in the bank’s financial soundness, those worrisome rumors must be false. Such reasoning might well be overoptimistic, however, since corporate executives have been known to buy shares in their own company in a calculated attempt to dispel negative rumors about the company’s health.
In the argument given, the two boldfaced portions play which of the following roles?
(A) The first describes evidence that has been taken as supporting a conclusion; the second gives a reason for questioning that support.
(B) The first describes evidence that has been taken as supporting a conclusion; the second states a contrary conclusion that is the main conclusion of the argument.
(C) The first provides evidence in support of the main conclusion of the argument; the second states that conclusion.
(D) The first describes the circumstance that the argument as a whole seeks to explain; the second gives the explanation that the argument seeks to
establish.
(E) The first describes the circumstance that the argument as a whole seeks to explain; the second provides evidence in support of the explanation that the argument seeks to establish.
Hello,
Can you please suggest, what will be conclusion here?
Because here 2 scenarios are explained, one positive , one negative so i am not able to apply" therefore test " also.
Can you please suggest, what will be conclusion here?
Because here 2 scenarios are explained, one positive , one negative so i am not able to apply" therefore test " also.
sayantanc2k
Expert
Joined: 14 Dec 2013
Last visit: 09 Dec 2022
Posts: 2,391
Location: Germany
GMAT 1: 780 Q50 V47
WE:Corporate Finance (Pharmaceuticals and Biotech)
Expert reply
VKat
In option B "a conclusion" refers to the conclusion of the shareholders who are relieved. The conclusion is that the company's stock price would now go up.
Posts: 20
Hi,
I have two queries. 1)Why option C is incorrect?? It aptly describe function of both BF.
2)Main conclusion of argument is "optimism is ill founded" then how first part of B can can support the conclusion??
I have two queries. 1)Why option C is incorrect?? It aptly describe function of both BF.
2)Main conclusion of argument is "optimism is ill founded" then how first part of B can can support the conclusion??
Posts: 4,849
pratikpokharkar
Hi Pratik
Let me try to answer your queries.
1) Why option C is incorrect?? It aptly describe function of both BF.
Let us examine what option (C) states about the second BF: "the second provides evidence in support of the explanation that the argument seeks to establish."
The second BF tries to provide an alternative hypothesis for what happens to a company's stock price when dividends are increased. As such, no evidence is provided in the second BF for any theories, making option (C) incorrect.
2) Main conclusion of argument is "optimism is ill founded" then how first part of B can can support the conclusion?
Option (B) does not state that the first BF supports the conclusion of the argument, which you have correctly identified. It merely states that the first BF supports a conclusion, which is correct, as evidenced by the statement following the first BF: "Shareholders...are now relieved since increasing dividends generally boosts a company's stock price".
In other words, shareholders concluded that the share price of the company would increase based on the evidence of increased dividend payout.
Hope this clarifies.
KarishmaB MartyMurray Can you please explain why option C is wrong? Looks okay to me..
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