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Investment, Interest rates and formula

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Investment, Interest rates and formula

by pepeprepa » Thu Aug 28, 2008 4:30 am
An investor purchased a share of non-dividend-paying stock for p dollars on Monday. For a certain number of days, the value of the share increased by r percent per day. After this period of constant increase, the value of the share decreased the next day by q dollars and the investor decided to sell the share at the end of that day for v dollars, which was the value of the share at that time. How many working days after the investor bought the share was the share sold, if
r= 100 * ( sqrt( (v+q)/p ) -1 ) ?
A) Two working days later.
B) Three working days later.
C) Four working days later.
D) Five working days later.
E) Six working days later
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Re: Investment, Interest rates and formula

by sudhir3127 » Thu Aug 28, 2008 5:01 am
pepeprepa wrote:An investor purchased a share of non-dividend-paying stock for p dollars on Monday. For a certain number of days, the value of the share increased by r percent per day. After this period of constant increase, the value of the share decreased the next day by q dollars and the investor decided to sell the share at the end of that day for v dollars, which was the value of the share at that time. How many working days after the investor bought the share was the share sold, if
r= 100 * ( sqrt( (v+q)/p ) -1 ) ?
A) Two working days later.
B) Three working days later.
C) Four working days later.
D) Five working days later.
E) Six working days later
For me its B

Assuming X days ...

i am using Compound Interest.

v = p (1+r/100)^x - q

if i solve for r i get

r=(xth root of (v +q)/p -1 )*100.......................................1

Question stem tells us that

r= 100 * ( sqrt( (v+q)/p ) -1 )...........................................2

substitute 2 in 1

we get
100 * ( ( (v+q)/p ) -1 )^1/2 = [(v +q)/p -1 )]^1/x*100

from this we know X =2

Thus the shares rose for 2 days and on the following day they fell and the investor sold in on the next day

thus its 2+ 1 days = 3

hope that helps..
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by pepeprepa » Thu Aug 28, 2008 5:04 am
That's it, I think there is only one way.
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great job! still one little question though

by Edthesock » Tue Jan 20, 2009 8:15 pm
Wow... I spent so long on this. Very good job Sudhir, very impressive, especially if you did it in 2 minutes like a standard GMAT question!

I'm okay for solving x to get 2 days in the compound interest formula, but how do you know the stock was sold 1 day later?
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Re: great job! still one little question though

by sudhir3127 » Tue Jan 20, 2009 9:51 pm
Edthesock wrote:Wow... I spent so long on this. Very good job Sudhir, very impressive, especially if you did it in 2 minutes like a standard GMAT question!

I'm okay for solving x to get 2 days in the compound interest formula, but how do you know the stock was sold 1 day later?
Because the question says
"After this period of constant increase, the value of the share decreased the next day by q dollars and the investor decided to sell the share at the end of that day for v dollars"

this period here is 2 days
next day would be day 3.

hope this clear .. do let me know if u need any help ..
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