A house cost Ms. Jones C dollars in 1965. Three years

Question

A house cost Ms. Jones C dollars in 1965. Three years later she sold the house for 25% more than she paid for it. She has to pay a tax of 50% of the gain. (The gain is the selling price minus the cost.) How much tax must Ms. Jones pay?

(A) C/24
(B) C/8
(C) C/4
(D) C/2
(E) 0.6C

The OA is the option B.

Is there a strategic approach for solving this PS question? Could anyone show it to me?

Brent@GMATPrepNow · Answer

VJesus12 wrote:A house cost Ms. Jones C dollars in 1965. Three years later she sold the house for 25% more than she paid for it. She has to pay a tax of 50% of the gain. (The gain is the selling price minus the cost.) How much tax must Ms. Jones pay?

(A) C/24
(B) C/8
(C) C/4
(D) C/2
(E) 0.6C

A house cost Ms. Jones C dollars in 1965. Three years later she sold the house for 25% more than she paid for it.
So, 3 years later, the house sold for 1.25C dollars

She has to pay a tax of 50% of the gain. (The gain is the selling price minus the cost.) How much tax must Ms. Jones pay?
Gain = selling price - cost
= 1.25C - C
= 0.25C

Tax = 50% of the gain
= 50% of 0.25C
= (1/2)(0.25C)
= (1/2)(1/4)(C)
= (1/8)(C)
= C/8

Answer: B

Brent Hanneson - Creator of GMATPrepNow.com

Vincen · Answer

Hello Vjesus12.

This is how I'd do the PS question.

We know that the house cost Ms. Jones C dollars in 1965 and she sold it, 3 years later, for 25% more than she paid for it. Then she earned: 25%*C dollars (the gain)

Now, since she has to pay a tax of 50% of the gain, then she has to pay $$50\%\cdot25\%\cdot C=\frac{50}{100}\cdot\frac{25}{100}\cdot C=\frac{1}{2}\cdot\frac{1}{4}\cdot C=\frac{1}{8}C.$$ Therefore, the correct answer is the option B.

I hope it helps you. <i class="em em-smiley"></i>

GMATGuruNY · Answer

VJesus12 wrote:A house cost Ms. Jones C dollars in 1965. Three years later she sold the house for 25% more than she paid for it. She has to pay a tax of 50% of the gain. (The gain is the selling price minus the cost.) How much tax must Ms. Jones pay?

(A) C/24
(B) C/8
(C) C/4
(D) C/2
(E) 0.6C

A house cost Ms. Jones C dollars in 1965. Three years later she sold the house for 25% more than she paid for it.
So, 3 years later, the house sold for 1.25C dollars

She has to pay a tax of 50% of the gain. (The gain is the selling price minus the cost.) How much tax must Ms. Jones pay?
Gain = selling price - cost
= 1.25C - C
= 0.25C

Tax = 50% of the gain
= 50% of 0.25C
= (1/2)(0.25C)
= (1/2)(1/4)(C)
= (1/8)(C)
= C/8

Answer: B

Brent Hanneson - Creator of GMATPrepNow.com

arosman · Answer

Original Cost: C Sale Price: 1.25C Gains before taxes: 1.25C - C = .25C Taxes: .25C * .5 = (1/4) * C * (1/2) ------> C/8 Answer: B

Jeff@TargetTestPrep · Answer

VJesus12 wrote:A house cost Ms. Jones C dollars in 1965. Three years later she sold the house for 25% more than she paid for it. She has to pay a tax of 50% of the gain. (The gain is the selling price minus the cost.) How much tax must Ms. Jones pay?

(A) C/24
(B) C/8
(C) C/4
(D) C/2
(E) 0.6C

Ms. Jones’s profit on the house is 1.25C - C = 0.25C dollars and thus she must have paid:

0.25C x 0.5 = C/4 x 1/2 = C/8 dollars in taxes.

Answer: B

Jeffrey Miller
Head of GMAT Instruction
[email protected]

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