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Profit-Dividend

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Profit-Dividend

by agemroy » Sun Jul 13, 2008 6:54 am
A person buys a share for $ 50 and sells it for $ 52 after a year. What is the total profit made by him from the share?
(I) A company pays annual dividend
(II) The rate of dividend is 25%

(A) Statement (I) ALONE is sufficient, but statement (II) alone is not sufficient

(B) Statement (II) ALONE is sufficient, but statement (I) is not sufficient

(C) BOTH statements TOGETHER are sufficient, but NEITHER statement alone is sufficient

(D) Each statement ALONE is sufficient

(E) Statements (I) and (II) TOGETHER are NOT sufficient



Plz explain. How is the dividend calculated?The face value of the share is not mentioned.
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by lion147 » Sun Jul 13, 2008 11:33 am
At first glance it looks like an interest rate question, so the answer would be C.

One interest payment of 25% per year:
50 + 0.25(50) = $62.50,
52 - 50 = $2

total profit = 12.5+2 = 14.5.

However, in reality when dividends are quoted as a percentage it is as a percentage of the current share price, and you've no way to determine what the price is at the time the dividend is paid. Dividends are normally quoted as a dollar/cent amount in the US.

But if I saw this in the GMAT, I'd assume it is just a straight interest question.
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by beeparoo » Wed Jul 16, 2008 1:03 pm
Hey agemroy, is this an official GMAC question? It seems different from the types I am used to seeing. Although interest-questions show up, this one seems inauthentic.

I wouldn't sweat it.
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