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Intern  Joined: 22 Aug 2014
Posts: 15
Location: United States
Concentration: Human Resources, General Management
GPA: 3.97
WE: Information Technology (Insurance)
An investor purchased 100 shares of stock X at 6 1/8 dollars  [#permalink]

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Difficulty:   85% (hard)

Question Stats: 58% (02:37) correct 42% (02:56) wrong based on 776 sessions

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An investor purchased 100 shares of stock X at 6 1/8 dollars per share and sold them all a year later at 24 dollars per share. If the investor paid a 2 percent brokerage fee on both the total purchase price and the total selling price, which of the following is closest to the investor's percent gain on this investment?

(A) 92%
(B) 240%
(C) 280%
(D) 300%
(E) 380%
Math Expert V
Joined: 02 Aug 2009
Posts: 8281
An investor purchased 100 shares of stock X at 6 1/8 dollars  [#permalink]

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email2vm wrote:

Since the purchase price is slightly more than 6$the profit would be slightly less than 300%. Also a 2% brokerage is negligible and it brings down the profit percentage only by a small value. Approximation is very useful to solve these kind of problems as the answer choices are far apart. Answer: C ##### General Discussion Director  D Joined: 05 Mar 2015 Posts: 980 An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags 3 1 1 email2vm wrote: An investor purchased 100 shares of stock X at$6 1/8 (or 49/8 $) per share and sold them all a year later at 24$ per share. If the investor paid a 2% brokerage fee on both the total purchase price and the total selling price, which of the following is the closest to the investors percent gain on the investment.

a> 92%
b> 240%
c> 280%
d> 300%
e> 380%

how would you solve this question. For the first time I realized that I need a some sleep before test.

Ravi

Some simple calculations to be made for this..
=100*49/8 + 2% of (100*49/8)
=624.75$similarly selling price = 24*100 - 2%of 2400(or u can add this to buy price also) =2352$
so Profit = SP-CP
=2352-624.75=1727.25$%= 1727.25/624.75 =2.76 ~ 280% Ans C Originally posted by rohit8865 on 09 Apr 2016, 19:55. Last edited by rohit8865 on 23 Sep 2018, 11:38, edited 1 time in total. Math Expert V Joined: 02 Aug 2009 Posts: 8281 Re: An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags 1 happyface101 wrote: An investor purchased 100 shares of stock X at$6.125 per share and sold them all a year later at $24 dollars per share. If the investor paid 2 percent brokerage fee on both the total purchase price and total selling price, which of the following is closest to the investor's percent gain on this investment? a. 92% b. 240% c. 280% d. 300% e. 380% What's the fastest / easiest way to solve this? Calculations can obviously get messy / become a time sink. HI A way I can think of is that the choices will get you close to the correct answer.. A thing of 6 1/8 has become 24... so profit of <18 on 6 1/8.. clearly it is slightly less than 300% ans 280%... Brokerage will make a difference of 2-4% which is very negligible.. _________________ Manager  Joined: 10 Apr 2016 Posts: 54 Concentration: Strategy, Entrepreneurship GMAT 1: 520 Q29 V30 GPA: 3.01 An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags 5 Solution 1 100 shares bought for 612.50 Sold 'm for 2400-2% 2% OF 612.50 is easy to calculate. 12.25 ... 2400 minus 2% is also easy to calculate--> 2400/100*2 = 48. So the profit amounts to 2350-625 (you can approximate here, it won't make much difference): 1725 1725 divided by 625 can be simplified as 69/25, which equals to 2,8. This can be done within 1.5 minutes. Solution 2 But if you're in a hurry, you can just see that the 1/8 is negligible and is only there to hand out complex calculations like the one above. [(2400-48)-(600+12)]/612 =[(2352)-(612)]/612 =1740/612 3 times 612 gives you 1836. Which is 96 more than needed. 96/612 is close to 1/6 (a bit less), which is close to 0.2. So you will need 2 times 612 and 80% of 612 to arrive at 1740. Ans, 280%. _________________ Took the Gmat and got a 520 after studying for 3 weeks with a fulltime job. Now taking it again, but with 6 weeks of prep time and a part time job. Studying every day is key, try to do at least 5 exercises a day. Intern  B Joined: 29 Nov 2015 Posts: 7 Re: An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags Thanks Mathiaskeul, Its very clear now Intern  Joined: 13 Jan 2010 Posts: 1 Schools: HBS '19, Stanford '19 Re: An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags cost of selling shares = (24*(98/100) we multiply by 98, because we loose 2% in brokerage fee reducing our selling price cost of buying shares = (49/8 * 102/100) we multiply by 102, because it costs more to buy the shares, when taking the brokerage fee into account % profit = (selling price/cost price * 100) -1 % profit = (24*98/100) divided by (49/8 * 102/100) * 100 -1 % profit = (24*98/100) * (100*8 / 49*102) * 100 - 1 % profit = (24*98*100*8)/(100*49*102) * 100 -1 % profit = (24*2*8/102) *100 -1 % profit = (192/51)*100 -1 % profit = (3.76 & 100) - 1 = 276%, c is the closest at 280% Intern  Joined: 24 Aug 2016 Posts: 28 An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags 2 1 Hi all, please let me know if there is something I am not grasping: Stocks purchased at$6.125.
100% profit on this investment = double the value = $12.50 per stock 200% profit on this investment = triples the value =$18.75 per stock
300% profit on this investment = 4x the original value = $25.00 per stock (roughly) Therefor profit just below 300% or 280 percent gain (especially after 'fees'). You can do this math in about 30 seconds. Logic: If I spend$100 and gain $100, 0% profit on my original investment. If I spend$100 and gain $150, 50% profit on my original investment. If I spend$100 and gain $200, 100% profit on my original investment. If I spend$100 and gain $300, 200% profit on my original investment. Any critique? Board of Directors P Joined: 17 Jul 2014 Posts: 2492 Location: United States (IL) Concentration: Finance, Economics GMAT 1: 650 Q49 V30 GPA: 3.92 WE: General Management (Transportation) Re: An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags 1 i used approximations...yet i took the longer way... purchased price let's say is 49/8 100 * 49/8 * 102/100 (2%) -> 49*102/8 selling price: 100*24*98/100 (2% commission fee) - 24*98 24*98/(49*102/8) 24*98*8/49*102 98 is a multiple of 49 -> simplify 24*2*8/102 24*8/51 192/51 -> this is not the end...selling price is 192/51 % greater than the purchase price. 192-51/51 (percent increase) = 141/51 -> we can clearly see that it's less than 300% and clearly more than 200%. only B and C remain... to have 300%, we need 153/51. since 141 is close to 153 - we can assume that it's ~280. C is the answer. Intern  B Joined: 07 Mar 2016 Posts: 25 Location: United States Concentration: General Management, International Business GMAT 1: 710 Q50 V35 GPA: 3.2 An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags this one was very annoying. I was between B and C. I knew that it is slightly below %300, but couldn't decide if it is below %290. I think autoboat's and mvictor' approaches are good for this type of question. Target Test Prep Representative G Status: Head GMAT Instructor Affiliations: Target Test Prep Joined: 04 Mar 2011 Posts: 2809 Re: An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags 5 4 surupab wrote: An investor purchased 100 shares of stock X at 6 1/8 dollars per share and sold them all a year later at 24 dollars per share. If the investor paid a 2 percent brokerage fee on both the total purchase price and the total selling price, which of the following is closest to the investor's percent gain on this investment? (A) 92% (B) 240% (C) 280% (D) 300% (E) 380% Since the investor bought and sold the same number (100) of shares of stock X, the percent change in his gain would be the same if he bought and sold 1 share of the stock. Therefore, let’s calculate the percent change on 1 share instead of 100 shares. Since he had to pay 2% commission on purchasing the stock (which means he actually had to pay 102% of the purchase price), his cost on one share is 6 ⅛ x 102/100 = 49/8 x 51/50. Similarly, since he had to pay 2% commission on selling the stock (which means he only received 98% of the selling price), his revenue on one share is 24 x 98/100 = 24 x 49/50. Therefore, the ratio of the revenue to the cost of 1 share of the stock is: (24 x 49/50)/(49/8 x 51/50) 24 x 49/50 x 8/49 x 50/51 24 x 1 x 8 x 1/51 192/51 192/51 can be approximated as 190/50 = 3.8 = 380%. That is, the revenue is approximately 380% of the cost. In other words, the profit (or gain) is approximately 280%. Answer: C _________________ # Jeffrey Miller Head of GMAT Instruction Jeff@TargetTestPrep.com See why Target Test Prep is the top rated GMAT quant course on GMAT Club. Read Our Reviews If you find one of my posts helpful, please take a moment to click on the "Kudos" button. Current Student B Joined: 27 May 2015 Posts: 12 Location: Venezuela GMAT 1: 720 Q49 V40 GPA: 3.76 Re: An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags Let me give away my two cents on this one. This approach didn't take me too much time. Purchase price $$=$$ $$6 \frac{1}{8}$$. Since I don't like mixed numbers I quickly transformed it to an improper fraction: $$\frac{49}{8}$$. Purchase price $$*$$ quantity of shares $$=$$ $$\frac{4900}{8}=\frac{1225}{2}$$ Selling price $$= 24$$ Selling price $$*$$ quantity of shares $$= 2400$$ Now let's set up the variation formula: $$\left(\frac{2400(1.02)}{\frac{1225(1.02)}{2}}-1\right)*100$$ Simplify it: $$\left(\frac{4800}{1225}-1\right)*100$$ Simplify it further until: $$\left(\frac{192}{49}-1\right)*100 \rightarrow \left(\frac{143}{49}\right)*100$$ Now, at this stage we now that $$3*49=147$$ which is greater than $$143$$, so the percent gain is slightly less than $$300\%$$. This should be sufficient to select option C; however, if you want more precision, you can try the following multiplication: $$2.5*49=122.5$$. Since $$122.5$$ is lower than $$143$$, we know that the percent gain was greater than $$250\%$$. Again, option C is the correct answer. Hope it helps. Manager  S Joined: 04 Oct 2015 Posts: 230 Location: Viet Nam Concentration: Finance, Economics GMAT 1: 730 Q51 V36 GPA: 3.56 Re: An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags The FASTEST and BEST way to solve such problem with ugly number like this one is to APPROXIMATE! _________________ Do not pray for an easy life, pray for the strength to endure a difficult one - Bruce Lee Intern  B Joined: 06 Apr 2017 Posts: 28 Location: United States (OR) Concentration: Finance, Leadership Schools: Haas EWMBA '21 GMAT 1: 730 Q48 V44 GMAT 2: 730 Q49 V40 GPA: 3.98 WE: Corporate Finance (Health Care) Re: An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags 1 The formula for percentage change is: $$\frac{new}{old}-1$$ $$new=24*.98 \rightarrow 24*\frac{49}{50}$$ $$old=6\frac{1}{8}*1.02 \rightarrow \frac{49}{8}*\frac{51}{50}$$ $$\frac{new}{old}*\frac{8*50}{8*50}=\frac{192*49}{49*51}=\frac{192}{51}=\frac{384}{102}$$ So the approximate percentage gain the investor made is slightly less than $$384\% - 100\% = 284\%$$ Answer C Intern  B Joined: 08 Aug 2016 Posts: 13 Re: An investor purchased 100 shares of stock X at 6 1/8 dollars [#permalink] ### Show Tags chetan2u wrote: email2vm wrote: An investor purchased 100 shares of stock X at$6 1/8 (or 49/8 $) per share and sold them all a year later at 24$ per share. If the investor paid a 2% brokerage fee on both the total purchase price and the total selling price, which of the following is the closest to the investors percent gain on the investment.

a> 92%
b> 240%
c> 280%
d> 300%
e> 380%

how would you solve this question. For the first time I realized that I need a some sleep before test.

Ravi

HI

there is enough in the choices to get you close to the correct answer..

A thing of 6 1/8 has become 24...
so profit of <18 on 6 1/8..
clearly it is slightly less than 300%
ans 280%... Brokerage will make a difference of 2-4% which is very negligible..

proper way would be
Add 2% of 6 1/8 and 24 and subtract from (24 - 6 1/8)...
answer =$$(24-6 \frac{1}{8} - 0.02(24+6 \frac{1}{8}))/(6 \frac{1}{8})$$

Hi chetan2u ,

Just a small doubt, wont we add 0.02(24+6) to the denominator?
The first time I solved it , I did so , since I have been applying
Profit% = Total Profit/Total Cost

And I i though brokerage eventually is a cost incurred?

Let me know if my understanding is not correct.
Intern  B
Joined: 27 Apr 2018
Posts: 17
Location: India
Schools: CBS '21, Marshall '21
GMAT 1: 600 Q44 V29 GPA: 3.9
An investor purchased 100 shares of stock X at 6 1/8 dollars  [#permalink]

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rohit8865 wrote:
email2vm wrote:
An investor purchased 100 shares of stock X at $6 1/8 (or 49/8$) per share and sold them all a year later at 24$per share. If the investor paid a 2% brokerage fee on both the total purchase price and the total selling price, which of the following is the closest to the investors percent gain on the investment. a> 92% b> 240% c> 280% d> 300% e> 380% how would you solve this question. For the first time I realized that I need a some sleep before test. Ravi Some simple calculations to be made for this.. buying price = price os total shares+brokerage charges on buy price =100*49/8 + 2% of (100*49/8) =624.75 similarly selling price = 24*100 - 2%of 2400(or u can add this to buy price also) =2352 so profit=SP-CP =2352-662.75=1727.25$
%= 1727.25/662.75
=2.76 ~ 280%

Ans C

It is mentioned that he paid on both PP and SP!?
Intern  S
Joined: 05 Dec 2017
Posts: 19
GMAT 1: 710 Q49 V38 An investor purchased 100 shares of stock X at 6 1/8 dollars  [#permalink]

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2
chetan2u wrote:
email2vm wrote:
An investor purchased 100 shares of stock X at $6 1/8 (or 49/8$) per share and sold them all a year later at 24\$ per share. If the investor paid a 2% brokerage fee on both the total purchase price and the total selling price, which of the following is the closest to the investors percent gain on the investment.

a> 92%
b> 240%
c> 280%
d> 300%
e> 380%

how would you solve this question. For the first time I realized that I need a some sleep before test.

Ravi

HI

there is enough in the choices to get you close to the correct answer..

A thing of 6 1/8 has become 24...
so profit of <18 on 6 1/8..
clearly it is slightly less than 300%
ans 280%... Brokerage will make a difference of 2-4% which is very negligible..

proper way would be
Add 2% of 6 1/8 and 24 and subtract from (24 - 6 1/8)...
answer =$$(24-6 \frac{1}{8} - 0.02(24+6 \frac{1}{8}))/(6 \frac{1}{8})$$

Hi chetan2u , I have a doubt -

in the last step of your approach : (24 − 6 1/8 − 0.02(24 + 6 1/8)) / (6 1/8)(24 − 6 1/8 − 0.02 (24 + 6 1/8)) / (6 1/8)

Why have we not divided the whole thing by 6 1/8 + 0.02(24 + 6 1/8) / (6 1/8)(24 − 6 1/8 − 0.02 (24 + 6 1/8) ? Isn't THAT the total cost that has been incurred by the investor? If we do use the mentioned value as the denominator, we'll get a profit of 256% (approx), which is closer to 240% than to 280%. I did it by this method and picked 240%. Could you please let me know where it is that I'm going wrong?
Intern  B
Joined: 22 Aug 2016
Posts: 13
An investor purchased 100 shares of stock X at 6 1/8 dollars  [#permalink]

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Hi chetan2u

I solved the question and got the profit percentage as 291.8

291.8 is closed to 300 than 280, hence I marked 300 in the answer choice. Can you please guide where I went wrong in my line of reasoning?

Thanks
Math Expert V
Joined: 02 Aug 2009
Posts: 8281
Re: An investor purchased 100 shares of stock X at 6 1/8 dollars  [#permalink]

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gauravjec wrote:
Hi chetan2u

I solved the question and got the profit percentage as 291.8

291.8 is closed to 300 than 280, hence I marked 300 in the answer choice. Can you please guide where I went wrong in my line of reasoning?

Thanks

The answer is closer to 287..
the reason you are getting 291 is may be you have not taken the brokerage in the total cost investment..
_________________ Re: An investor purchased 100 shares of stock X at 6 1/8 dollars   [#permalink] 11 Oct 2018, 01:06

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