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At the end of the first quarter, the share price of a

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At the end of the first quarter, the share price of a

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At the end of the first quarter, the share price of a certain mutual fund was 20 percent higher than it was at the beginning of the year. At the end of the second quarter, the share price was 50 percent higher than it was at the beginning of the year. What was the percent increase in the share price from the end of the first quarter to the end of the second quarter?

A. 20%
B. 25%
C. 30%
D. 33%
E. 40%

OA B

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AAPL wrote:
At the end of the first quarter, the share price of a certain mutual fund was 20 percent higher than it was at the beginning of the year. At the end of the second quarter, the share price was 50 percent higher than it was at the beginning of the year. What was the percent increase in the share price from the end of the first quarter to the end of the second quarter?

A. 20%
B. 25%
C. 30%
D. 33%
E. 40%
Let $100 = share price at the beginning of the year

At the end of the first quarter, the share price of a certain mutual fund was 20 percent higher than it was at the beginning of the year.
So, $120 = share price at the end of the first quarter

At the end of the second quarter, the share price was 50 percent higher than it was at the beginning of the year.
So, $150 = share price at the end of the second quarter

What was the percent increase in the share price from the end of the first quarter to the end of the second quarter?
So, we want the percent increase from $120 to $150

Percent increase = 100 x (new - old)/old
= 100 x ($150 - $120)/$120
= 100 x 30/120
= 25%

Answer: B

Cheers,
Brent

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Calculating the correct answer isn't difficult, as Brent demonstrated. However, savvy GMAT test takers will always try to use logic to eliminate answer choices before they even start calculating!

The student who isn't reading carefully might think "up 20%... then up 50%... that's a difference of 30 between those two." But we know that 30 is a trap answer - in percent change, when our comparison point (our base) changes, then the percent changes, too.

The price at the end of the 1st quarter is 20% greater than the price at the beginning of the year. If we took a 30% increase on that new number, that would be greater than a 30% difference from our original value. In other words:
original + (20% of the original) + (30% of the original) = 150% of the original --> 50% increase
but:
original + (20% of the original) + (30% of the NEW, higher value) > 150% of the original

Thus, it cannot be a 30% increase from the 1st quarter value to the 2nd quarter value; it must be that a smaller percentage of the 1st quarter price was added to get us to 150% of the original. We can eliminate C, D, and E.

At that point, we still have 2 answers remaining, so we would have to do the math, as Brent demonstrated. But it's always helpful to eliminate answers before you start! Sometimes you can eliminate everything but a single answer and never have to do the math. At other times, it can help you to avoid mistakes: "hm, I landed on E, but I already eliminated that because it's illogical. I must have made a mistake."

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Ceilidh Erickson
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EdM in Mind, Brain, and Education
Harvard Graduate School of Education


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