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Mr. Odusote owns two kinds of stock shares: r shares of stock X and r

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Senior Manager
Joined: 21 Oct 2013
Posts: 418
Mr. Odusote owns two kinds of stock shares: r shares of stock X and r  [#permalink]

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15 Jan 2014, 13:25
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00:00

Difficulty:

35% (medium)

Question Stats:

67% (01:43) correct 33% (01:46) wrong based on 150 sessions

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Mr. Odusote owns two kinds of stock shares: r shares of stock X and r shares of stock Y. Stock X yields an annual dividend of 2%, while stock Y yields an annual dividend of 6%. If Mr. Odusote were to sell all or his shares of stock X and use that money to purchase shares of stock Y, by what percent would his annual dividend increase?

(1) Each share of stock X costs twice as much as each share of stock Y.
(2) Each share of stock Y costs \$45.

OE
x = value of one share of X
y = value of one share of Y
Old Value = [2%xr + 6%yr]

(1): x = 2y
New value = 6%y(r + 2r) = 18%yr
Old value = (2%×(2yr) + 6%yr) = 10%yr
Able to find % change
Sufficient
(2): Not given cost of stock X
Insufficient
Magoosh GMAT Instructor
Joined: 28 Dec 2011
Posts: 4486
Re: Mr. Odusote owns two kinds of stock shares: r shares of stock X and r  [#permalink]

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15 Jan 2014, 17:23
2
goodyear2013 wrote:
Mr. Odusote owns two kinds of stock shares: r shares of stock X and r shares of stock Y. Stock X yields an annual dividend or 2%, while stock Y yields an annual dividend or 6%. If Mr. Odusote were to sell all or his shares of stock X and use that money to purchase shares of stock Y, by what percent would his annual dividend increase?
(1) Each share of stock X costs twice as much as each share of stock Y.
(2) Each share of stock Y costs \$45.

Dear goodyear2013,
I'm happy to help.

You may find this blog article germane to this problem:
http://magoosh.com/gmat/2013/gmat-quant ... oportions/

Statement #1:
Suppose each share of Y costs P, so each share of X costs 2P.
Right now
from X, a dividend of (0.02)*r(2P) = (0.04)*rP
from Y, a dividend of (0.06)*rP
thus, a total dividend of (0.10)*rP
Selling r share of X would allow Mr. Odusote to purchase 2r shares of Y, for a total cache of 3r shares of Y
Then,
dividend = (0.06)*(3r)P = (0.18)*rP
The percent change from (0.10)*rP to (0.18)*rP would be the same as the percent change from 10 to 18. That's an 80% increase. We can calculate an answer from this. This statement, alone and by itself, is sufficient.

Statement #2:
Now, we know the actual price of a share of Y, but we have absolutely no clue about the price of X or even whether it is greater or less than X. This statement, alone and by itself, is insufficient.

Answer = (A)

Does all this make sense?
Mike
_________________

Mike McGarry
Magoosh Test Prep

Education is not the filling of a pail, but the lighting of a fire. — William Butler Yeats (1865 – 1939)

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Re: Mr. Odusote owns two kinds of stock shares: r shares of stock X and r  [#permalink]

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06 Sep 2018, 08:09
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Re: Mr. Odusote owns two kinds of stock shares: r shares of stock X and r   [#permalink] 06 Sep 2018, 08:09
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Mr. Odusote owns two kinds of stock shares: r shares of stock X and r

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