Fund manager: over the last five years, the various stock funds manage

Question

Fund manager: over the last five years, the various stock funds managed by our company increased on average by 7 percent more in value than the market as a whole annually. Furthermore, the performance of each particular stock fund has not varied much from one year to the next, and our few investment products other than stock funds have stayed even with the market. These results show the success of our company: each year, most of our investment products have increased in value more than the market.

The debater's argument is most vulnerable to criticism on which of these grounds?

A. It takes for granted that the stock funds are typical of the company with regard to the average increase in value per year.

B. It takes for granted that if a certain average annual increase in value was obtained by each investment product, then each stock fund increased each year by approximately the same amount.

C. It confuses a claim from which the argument's conclusion about the company would necessarily follow with a claim that would follow from the argument's conclusion only with a high degree of probability.

D. It overlooks the possibility that even if, on average, the stock funds increased by an average annual value, many stock funds may have increased less than the market as whole.

E. It overlooks the possibility that even if most investment products at the company have increased in value more than the market this year, any one investment product may, in some years, fail to increase in value at all.

Source: GmatFree

broall · Answer

The argument is: The average value is higher => most of elements in that set is higher in value.

Assume that that set has 5 elements: each of a1, a2, a3, a4 is 1 lower in value. However, a5 is 10 higher in value. In total that set is 6 higher in value, but most of elements in that set is lower in value. This means that the argument is wrong.

We come to choice E, as the correct answer.

nks2611 · Answer

the answer should be D as it is possible that the major part of the investment is other than the stock fund so even if increase in the value of stock fund it does not reflect company's success with regard to increase in the value of just stock fund .
although i have a doubt regarding A , can someone explain the better reason to eliminate A

adityapareshshah · Answer

A very wordy question and a tough one to understand. Can anyone please explain the question and give the OA/OE.

sillyboy · Answer

OE:

Explanation

Reading the question: the fund manager's argument has many error-prone features. It draws conclusions from a group of things, it deals in percentages, and it makes comparisons. We will use term matching to hunt for an error, starting with the conclusion.

Attachment:

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Creating a filter: each half of the conclusion is connected in multiple dubious ways to the evidence. The right answer will probably involve a bad bridge from the evidence to one or to the other. For example, the evidence is saying stock funds have beat the market "on average." But that is not the same as saying that "most of our investment products" have beat the market. Most could, in fact, be failures, with one anomalous market saving the average. The second sentence doesn't help this problem. So we'll paraphrase this error as "average <> most" and use that as our filter.

Applying the filter: (D) matches our filter precisely. Choice (A) is not really an error, given the second sentence of the prompt. (B), similarly, describes something the argument doesn't do. (C) is similar to (D)--but who knows what the probability really is? It's not necessarily high. (E) is similar to (D)--but pointing out that "any one" product might have done poorly doesn't actually undermine the argument much, because it still allows for "most of our investment products" to beat the market. The correct answer is (D).

chesstitans · Answer

"over last 5 years" and "each year" is the key, then A,C,E are out => B,D are left. 
B talks about the same amount of each year. this does not weaken the argument at all. On the other hand, D weakens the idea of the conclusion that "most of stocks increased values each year"

Arro44 · Answer

I solved this one based on the classic blunder of "wrongly generalized average".

However, I have to admit that I had quite some difficulties to actually understand some of the answer choices.

ayushkumar22941 · Answer

I fail to understand what choice c intend to say .it's too complex

Posted from my mobile device

krysss · Answer

hi, could anyone help to explain answer c? i believe that the claim is highly possible but not certain (necessary). instead, for the answer d, I suppose that "many" is incorrect, cuz the claim only say that "most of" are higher.

Ayush8765 · Answer

coould someone explain in detail ?? i thought it was d. in easy language could someone explain?

egmat · Answer

Ayush8765 D is indeed the correct answer. Let me explain why in simple terms. The Core Flaw: Confusing "Average" with "Most" Here's what the argument does: Premises: Stock funds averaged 7\% MORE than the market over 5 years Each stock fund's performance was consistent year to year Other products stayed even with the market Conclusion: Each year, MOST investment products increased more than the market. The Problem: An average beating the market doesn't mean most funds beat the market! Simple Example: Imagine your company has 5 stock funds with these performances: Fund 1: +17\% above market Fund 2: +13\% above market Fund 3: -3\% below market Fund 4: -5\% below market Fund 5: -7\% below market Average performance: \frac{17+13-3-5-7}{5} = \frac{15}{5} = +3\% above market See the issue? The average is positive ( +3\% above market), but MOST funds ( 3 out of 5 ) actually performed BELOW the market! This is exactly what Option D identifies: "even if, on average, the stock funds increased by an average annual value, many stock funds may have increased less than the market as whole." The argument uses average performance as evidence but concludes about most products - these are completely different things! Hope you are clear now about it. Feel free to ask any questions if you still feel confused

Fund manager: over the last five years, the various stock funds manage

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Fund manager: over the last five years, the various stock funds manage

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