Two hedge funds reported their performance for the last fiscal year.

Question

Two hedge funds reported their performance for the last fiscal year. Hedge fund A earned 5% and hedge fund B earned 8% last year. How many more dollars did hedge fund B generate than did hedge fund A?

(1) Hedge fund B managed $2M more in assets under management than did hedge fund A.

(2) The total amount of money earned by the two hedge funds last year was $1.2M

globaldesi · Answer

Two hedge funds reported their performance for the last fiscal year. Hedge fund A earned 5% and hedge fund B earned 8% last year. How many more dollars did hedge fund B generate than did hedge fund A?

(1) Hedge fund B managed $2M more in assets under management than did hedge fund A.

(2) The total amount of money earned by the two hedge funds last year was $1.2M

Two hedge funds reported their performance for the last fiscal year. Hedge fund A earned 5% and hedge fund B earned 8% last year. How many more dollars did hedge fund B generate than did hedge fund A?

(1) Hedge fund B managed $2M more in assets under management than did hedge fund A.

let fund in A be x 
so in B = x+2
amount more = 0.08(x+2)- 0.05x
= 0.03x+0.16

x is still unknown hence insufficient

(2) The total amount of money earned by the two hedge funds last year was $1.2M

0.08b+0.05a= 1.2

insufficieent

Combine A and B

b = x+2
 => 0.08(x+2)+0.05x= 1.2

one variable 1 equation

thus cane be found
hence sufficient

C

SairamRamo · Answer

Assume 
asset cost of A = X
asset cost of B = Y

Given 
Earnings of A = 0.05 * X
Earnings of B = 0.08 * Y

Required = (0.08 * Y) - (0.05 * X) ??

Statement 1  : Y = 2million + X

Required  = 0.08* 2million + 0.03* X  Not sufficient

Statement 2 :  (0.08 * Y) + (0.05 * X) = 1.2million

Required  = 1.2million - 0.1*X  Not sufficient

With  Statment 1 + Statement 2   we have 2 equations

1. (0.08 * Y) + (0.05 * X) = 1.2million
2. Y = 2million + X

We can solve for X and Y, and Find (0.08 * Y) - (0.05 * X)

Answer is C

carouselambra · Answer

IMO C

Two hedge funds reported their performance for the last fiscal year. Hedge fund A earned 5% and hedge fund B earned 8% last year. How many more dollars did hedge fund B generate than did hedge fund A?

Task: We need to deduce 8% (Fund B) - 5%(Fund A)

(1) Hedge fund B managed $2M more in assets under management than did hedge fund A.
5% of x + 8% of (2+x) = ?
Insufficient.

(2) The total amount of money earned by the two hedge funds last year was $1.2M
5% of (Fund A)+ 8% of (Fund B) = 1.2M
We do not know the values of Fund A and Fund B.
Insufficient.

Combining statements 1 and 2, we get :
5% of x + 8% of (2+x) = 1.2M , which is enough for us to find the value of x.
Hence (c) is the correct answer.

IanStewart · Answer

I don't see how one could decide between C or E here. If we assume (as the solutions above do) that the "assets under management" mentioned in Statement 1 are the same "assets" on which the funds earned their 5% and 8% returns, then we have two unknowns, and each Statement gives us a distinct linear relationship between those two unknowns. So using both Statements, we can definitely solve for everything, and since neither Statement alone lets us answer the question, the answer is C.

But this question uses financial jargon you certainly don't need to know for the GMAT. I didn't know what the phrase "assets under management" even meant until I looked it up just now. And it has no agreed definition. Sometimes it means the amount invested by a fund. Sometimes it is the amount invested plus other assets, like cash on hand. And if the "assets under management" might include cash that was not invested at all, then Statement 1 does not give us a usable equation (since we have no idea how much each fund actually invested, and no idea if the 5% and 8% in the stem apply only to each fund's investments, or to their total assets), and the answer becomes E.

No actual GMAT question would be unclear about these things. If a real GMAT question wanted to you to understand that a fund earned 5% on its "assets under management", it would say so explicitly, though I can't imagine even seeing a phrase like that on the test.

gmatcafe · Answer

Let A be the the amount of hedge fund A's assets under management and let B be the amount of hedge fund B's assets under management. Then, last year hedge fund A earned 0.05A and hedge fund B earned 0.08B. We need to find 0.08B-0.05A.

(1) Hedge fund B managed $2M more in assets under management than2 did hedge fund A. - We are given that B=A+2. Then, 0.08B-0.05A=0.08(A+2)-0.05A=0.08A+0.16-0.05A=0.03A+0.16 ----> We still don't know the value of A, so this statement alone is  insufficient .

(2) The total amount of money earned by the two hedge funds last year was $1.2M. We are given that 0.05A+0.08B=1.2 From this statement alone we cannot find 0.08B-0.05A. So this statement is  insufficient.

Now, we take both statements together: 
B=A+2
0.05A+0.08B=1.2 -----> 0.05A+0.08(A+2)=1.2 ------> 0.05A+0.08A+0.16=1.2----->0.13A=1.04 ---->A=8 We can also find 0.08B-0.05A. So both statements taken together is  sufficient C)

RamTee · Answer

Assume Hedge A earned X (5%), and the hedge B earned Y (8%). I am assuming all denomination is in millions
The formula using option 1 will look like (x+2)*1.08 + (x)(1.05) ====> .03x + 2.16. Since we dont know X value we cant solve just using option A

The formula using option 2 will look like (y)*1.08 + (x)*1.05 = 1.2 
Since we dont know X nor Y's value we cant solve just using option B

However using A and B options, we know that Y = X+2 (via option A). WE can use this value in equation derived in option 2 and solve the question. Its option C!

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Two hedge funds reported their performance for the last fiscal year.

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