If stock is sold three months after it is purchased, the for

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BTGmoderatorDC: Moderator; Posts: 7187; Joined: Thu Sep 07, 2017 4:43 pmFollowed by: 23 members

by BTGmoderatorDC » Tue Apr 16, 2019 6:03 pm

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If stock is sold three months after it is purchased, the formula above relates p, d, s, and r, where p is the purchase price of the stock, d is the amount of any dividend received, s is the selling price of the stock, and r is the yield of the investment as a percent. If Rose purchased $400 worth of stock received a $5 dividend and sold the stock for $420, for three months after purchasing it, what was the yield of her investment, according to the formula? (Assuming she paid no commissions.)

A. 1.25%
B. 5%
C. 6.25%
D. 20%
E. 25%

OA E

Source: Official Guide

Source: Beat The GMAT — Problem Solving | Tue Apr 16, 2019 6:03 pm

deloitte247: Legendary Member; Posts: 2214; Joined: Fri Mar 02, 2018 2:22 pmFollowed by: 5 members

by deloitte247 » Sun Apr 21, 2019 1:51 am

$$r=400\left(\frac{D+S-P}{P}\right)$$
where D = 5 dollar ; S =420 dollar ; and P = 400 dollar
$$r=400\left(\frac{5+420-400}{400}\right)$$
$$r=400\left(\frac{425-400}{400}\right)$$
$$r=\frac{400}{1}\cdot\frac{25}{400}$$
$$r=25$$
$$Answer\ is\ Option\ E$$

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Jay@ManhattanReview: GMAT Instructor; Posts: 3008; Joined: Mon Aug 22, 2016 6:19 amFollowed by: 34 members; Location: Grand Central / New York; Thanked: 470 times

by Jay@ManhattanReview » Mon Apr 22, 2019 12:23 am

BTGmoderatorDC wrote:If stock is sold three months after it is purchased, the formula above relates p, d, s, and r, where p is the purchase price of the stock, d is the amount of any dividend received, s is the selling price of the stock, and r is the yield of the investment as a percent. If Rose purchased $400 worth of stock received a $5 dividend and sold the stock for $420, for three months after purchasing it, what was the yield of her investment, according to the formula? (Assuming she paid no commissions.)

A. 1.25%
B. 5%
C. 6.25%
D. 20%
E. 25%

OA E

Source: Official Guide

From the given information, we have

P = $400, S = $420, and D = $5

Thus, r = 400(5 + 420 – 400)/400 = 25

The correct answer: E

Hope this helps!

-Jay
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