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Vincen: Legendary Member; Posts: 2898; Joined: Thu Sep 07, 2017 2:49 pm; Thanked: 6 times; Followed by:5 members

At the start of trading on a particular . . .

by Vincen » Tue Dec 19, 2017 7:22 am

At the start of trading on a particular day, the price of stock x is $5. If during the day the price falls to $4 by what percent does the price of the stock decrease?

A. 8%
B. 12.5%
C. 14%
D. 16%
E. 20%

The OA is option E.

How can I calculate the percent decrease?

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Source: Beat The GMAT — Problem Solving | Tue Dec 19, 2017 7:22 am

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[email protected]: Elite Legendary Member; Posts: 10392; Joined: Sun Jun 23, 2013 6:38 pm; Location: Palo Alto, CA; Thanked: 2867 times; Followed by:511 members; GMAT Score:800

by [email protected] » Tue Dec 19, 2017 12:48 pm

Hi Vincen,

We're told that at the start of trading on a particular day, the price of Stock X is $5 and that during the day the price falls to $4. We're asked by what percent does the price of the stock decrease. This question requires the use of the Percent Change Formula:

Percent Change = (New - Old)/(Old) = (Difference)/(Original)

The New number is 4 and the Old/Original number is 5, so we have (4 - 5)/5 = -1/5 = 20% decrease

Final Answer: E

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Rich

Contact Rich at [email protected]

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Scott@TargetTestPrep: GMAT Instructor; Posts: 8086; Joined: Sat Apr 25, 2015 10:56 am; Location: Los Angeles, CA; Thanked: 43 times; Followed by:29 members

by Scott@TargetTestPrep » Thu Sep 12, 2019 6:21 pm

Vincen wrote:At the start of trading on a particular day, the price of stock x is $5. If during the day the price falls to $4 by what percent does the price of the stock decrease?

A. 8%
B. 12.5%
C. 14%
D. 16%
E. 20%

The OA is option E.

How can I calculate the percent decrease?

We can create the following equation in which n = the percentage decrease:

5(1 - n/100) = 4

5(100 - n)/100 = 4

500 - 5n = 400

5n = 100

n = 100/5 = 20

Alternate Solution:

Let's use the percent change formula, which states: % change = [(Final Value - Original Value) / Original Value] x 100%. For this problem, the original value is 5 and the final value is 4.

% change = [(4 - 5) / 5] x 100%

% change = -1/5 x 100%

% change = -0.2 x 100%

% change = -20%

The negative value indicates a percentage decrease, so we have a 20% decrease in the price of the stock.

Answer: E

Scott Woodbury-Stewart
Founder and CEO
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