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

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

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New post Updated on: 06 Oct 2017, 02:28
2
6
00:00
A
B
C
D
E

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  95% (hard)

Question Stats:

39% (01:55) correct 61% (02:09) wrong based on 280 sessions

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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

Source : LSAT

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Originally posted by snipertrader on 04 Oct 2009, 02:47.
Last edited by broall on 06 Oct 2017, 02:28, edited 1 time in total.
Reformatted question, OA added
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Re: When the rate of inflation exceeds the rate of return on the most  [#permalink]

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New post 04 Oct 2009, 08:18
snipertrader wrote:
Source : LSAT

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


Looks like C to me. A and D can be true, but they are not MUST.
If the decline is more than the formula that is given, then the investment in question is other than the most profitable one, because for the most profitable investment the decline will me minimum.
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New post 04 Oct 2009, 08:29
1
OA is C

This is how i approached the problem. I was looking for an external factor that would have caused the effect mentioned. (decline in the value of Investment)


A) the rate of inflation has risen - Already given in the stem

B) the investment in question is becoming less profitable - Out of scope

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

D) the rate of return on the most profitable investment available has declined - Already given in the stem

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

Was stuck between C and E.
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New post 04 Oct 2009, 08:39
It should not be E....
I too got really confused and took some time to get it right between C and E.
A minor conclusion that can also be drawn from the stimuli is that, if somebody, invests in an instrument other than the most profitable investment, he is bound to get a higher negative return....
This excludes option E.
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New post 04 Oct 2009, 20:37
B and C are in a way similar but B is very vague. (becoming less profitable).
The argument is based on two aspects - Rate of inflation & most profitable investment.

When in doubt... i always try to rally around the key words given in the stem.
Hope this helps.
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New post 08 Oct 2009, 21:13
Its C.

The questions says that

P (loss) = Inflation percent - profit on most profitable investment

If a particular investment got a greater loss then it means that its not as profitable as most profitbale

To explain in numbers
investment made - 100
Inflation percent be 5%
Profit on most profitable be 3%

so the real value of investment should 105 but is only 103 and p is 2%

so if a particular investment has loss greater p that means that it is less profitable since the inflations stays the same for all investments......
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New post 09 Oct 2009, 03:47
This one is real toughie between B and C
B says the businesss is less proffitable which is correct. To make the investment go below the minimum percentage either the cost or the revenue has to decrease. Either way both will result in the profitibility of the business.

C is also kind of correct. Had it been 'the investment in question is less profitable than the most profitable investment available theortically' it would have made more sense because practically it might happen that all businesses have failed to at much deeper level than the business at hand.
So the business we are talking about perhaps becomes the most proffitable of all.
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New post 09 Oct 2009, 07:38
Was stuck between B and C.. Thanks sniper your POE is really helpful to arrive at the right answer..
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New post 10 May 2010, 06:15
We can't bring new info to the argument. So, only A and C left.

Confused b/w A and C, as it is given that when the rate of inflation exceeds (not has exceeded - crucial point). Due to this I marked A.

It is my fault no to read the argument carefully that we are given two types of investments: most profitable and any.

Thanks snippertrader for the post.
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New post 10 May 2010, 14:45
manojgmat wrote:
I chose B, why B cannot be answer?


There are TWO investments posited in the question. The first is "the most profitable investment". The second is "a particular investment". The second is also the investment under investigation.

B cannot be the answer because B assumes that the "particular investment" IS "the most profitable investment", but nothing in the question explicitly states that they are the same.
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New post 11 May 2010, 09:13
Xisiqomelir wrote:
manojgmat wrote:
I chose B, why B cannot be answer?


There are TWO investments posited in the question. The first is "the most profitable investment". The second is "a particular investment". The second is also the investment under investigation.

B cannot be the answer because B assumes that the "particular investment" IS "the most profitable investment", but nothing in the question explicitly states that they are the same.



Also, B cannot be right because a particular investment can become more profitable but still decline more than "that percentage", which is the difference between inflation rate the the ROI of the MOST profitable investment.
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New post 06 May 2011, 12:31
'B cannot be the answer because B assumes that the "particular investment" IS "the most profitable investment", but nothing in the question explicitly states that they are the same'

good explanation this , i came to C in 1:59 min .
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New post 06 May 2011, 12:35
@ calvinhobbes , i don't understand how this is possible

''Also, B cannot be right because a particular investment can become more profitable but still decline more than "that percentage", which is the difference between inflation rate and the ROI of the MOST profitable investment''
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New post 06 May 2011, 13:22
C is the answer because:
the stem says "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:

the most important phrase in the stem is "most profitable", the base of the %term in question is the comparison b/w inflation and the most profitable. so anything that is more than this % have to be compared to the "most profitable".

C is the only choice providing the specific base of comparison "most profitable",
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New post 16 May 2011, 02:55
Most profitable investment will have a profitability decline %.
if the profitability decline % is more for the investment in question,its obvious that the profitability of the investment will be lesser than the most profitable investment.

Hence C comes out clean in this.
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New post 13 Jul 2011, 09:02
was stuck between B and C. felt inclined to choose C but picked B as it seemed correct.

ruled out E as it seems out of scope/unclear as the "change": whatever that is - it is not mentioned.
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