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# When the rate of inflation exceeds the rate of return on the

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When the rate of inflation exceeds the rate of return on the [#permalink]

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21 Dec 2003, 00:02
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When the rate of inflation exceeds the rate of return on the most profitable investment available, the difference between those two rates will be the percentage by which, at a minimum, the value of any investment will decline. If in such a circumstance the value of a particular investment declines by more than that percentage, it must be true that_________________________.

Which one of the following logically completes the argument?

A) the rate of inflation has risen

B) the investment in question is becoming less profitable

C) the investment in question is less profitable than the most profitable investment available

D) the rate of return on the most profitable investment available has declined

E) there has been a change in which particular investment happens to be the most profitable available

i got this wrong.
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21 Dec 2003, 00:44
very tough one, definitely took me more than 2 minutes but i would say B although i'm totally sure

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21 Dec 2003, 01:24
I opt for C, a rather easy question...

If the value of a particular investment declines by more than a minimum for the most profitable investment, then the investment in question is LESS profitable.

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21 Dec 2003, 04:30
ok.. whats wrong with D?

My equation was...

rate of inflation - rate of return = % by which value of any investment will decline

now if "Rate of return" has declined that means right side will increase. right?
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21 Dec 2003, 08:08
C

mbamantra wrote:
Quote:
ok.. whats wrong with D?

The premise says "the value of a particular investment"
D says "the rate of return on the most profitable investment ...."
How can something that is happening to a 'particular' investment affect the 'most' profitable investment? they are two different investments ... a change in one will NOT DIRECTLY affect the other ... there will be a relative change between the two, as suggested by C, but not an actual change in the other as stated in D

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Re: CR:Inflation & rate of return [#permalink]

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21 Dec 2003, 16:29
mbamantra wrote:
When the rate of inflation exceeds the rate of return on the most profitable investment available, the difference between those two rates will be the percentage by which, at a minimum, the value of any investment will decline. If in such a circumstance the value of a particular investment declines by more than that percentage, it must be true that_________________________.

Which one of the following logically completes the argument?

A) the rate of inflation has risen

B) the investment in question is becoming less profitable

C) the investment in question is less profitable than the most profitable investment available

D) the rate of return on the most profitable investment available has declined

E) there has been a change in which particular investment happens to be the most profitable available

i got this wrong.

D is best.

the above situation is only possible when D has happened

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21 Dec 2003, 20:35
Ans is C

My 2 cents. I feel that D is beyond the scope. It might be correct in the overall scenario, but C is more closer to the question asked. In other words it (choice C) seems to provide a more direct link, unlike D.

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22 Dec 2003, 02:24
Agree with C.

D seems to be wrong because whatever happens with investment under question it has nothing to do with return of another investment.
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Re: CR:Inflation & rate of return [#permalink]

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03 Jun 2010, 10:09
I dont catch this one.
Could anyone explain further?
Thanks.
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Re: CR:Inflation & rate of return [#permalink]

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05 Jun 2010, 09:52
if the rate of return is > than the rate of return on most profitable investment then the difference between 2 rates (rate of inflation - rate of return, lets say 3) will be percentage (3%) by which the value, at a minimum, of the most profitable investment will decline. (so the value of the most proftable investment will decline by 3% at a minimum)

So if the value of some XYZ investment declines more than that percentage (3%) then it means that the XYZ investment is less profitable than the most profitable investment

A) the rate of inflation has risen - so what?

B) the investment in question is becoming less profitable - we know that

C) the investment in question is less profitable than the most profitable investment available - correct

D) the rate of return on the most profitable investment available has declined - we are talking about the particular investment

E) there has been a change in which particular investment happens to be the most profitable available - makes no sense

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Re: CR:Inflation & rate of return [#permalink]

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05 Jun 2010, 20:52
So what is OA?
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Re: CR:Inflation & rate of return [#permalink]

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12 Jan 2014, 06:46
gmatjon wrote:
So what is OA?
OA is C.
Consider Inflation Rate =10% ; ---(1)
Rate of Return on Most profitable investment = 6% ----(2)
Rate of Return on particular investment = Anything less than or equal to 6% ----(3)
A/D/E will just shift the percentages of 10% or 6% mentioned above and will not add anything to the conclusion as they are just talking about shifting rate of inflation or rate of return on most profitable investment.

Only B and C talk about investment in question as has been tried to say about particular investment in the conclusion.

B) investment in question is becoming less profitable.
Investment in question as in 3 could have 6%(the max return) or less than 6%, say 3%.
In first case, the investment will decline(check definition of decline from the stimulus) by 4%(10%-6%) which is the minimum decline.
In second case, the investment will decline by 7%(10%-3%), which is more decline than expected.
So, due to the first case, where the decline is not always greater than 4%(which is our first case), so B cant be drawn.

C) investment in question is less profitable than the most profitable investment available.
Here the option is talking about only the case where the return is say 3%(anything lesser than 6%).
This decline will be 7% and will always be lesser than decline of 4%

HTH
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Re: When the rate of inflation exceeds the rate of return on the [#permalink]

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12 Jan 2014, 09:10
When the rate of inflation exceeds the rate of return on the most profitable investment available, the difference between those two rates will be the percentage by which, at a minimum, the value of any investment will decline. If in such a circumstance the value of a particular investment declines by more than that percentage, it must be true that_________________________.

Which one of the following logically completes the argument?

A) the rate of inflation has risen .....MAY/ MAY NOT BE TRUE.... DEPENDS ON RATE OF RETURN TOO

B) the investment in question is becoming less profitable .....BUT RATE OF INFLATION TOO MATTERS

C) the investment in question is less profitable than the most profitable investment available...ONE THING IS CLEAR ...ONLY IF THE RATE OF RETURN OF AN INVESTMENT IS LESS THAN THE MOST PROFITABLE INVESTMENT, WILL THE INVESTMENT DECLINE BEYOND THE "RETE OF INFLATION - MAX RATE OF RETURN"........HENCE CORRECT....

D) the rate of return on the most profitable investment available has declined.....SOUNDS CORRECT ...BUT NEED NOT BE SO....EVEN WITHOUT THIS DECLINE value of a particular investment CAN declines by more than that percentage

E) there has been a change in which particular investment happens to be the most profitable available...IRRELEVANT

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Re: When the rate of inflation exceeds the rate of return on the   [#permalink] 12 Jan 2014, 09:10
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# When the rate of inflation exceeds the rate of return on the

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