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

This topic has expert replies
Legendary Member
Posts: 2276
Joined: Sat Oct 14, 2017 6:10 am
Followed by:3 members

Timer

00:00

Your Answer

A

B

C

D

E

Global Stats

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?

GMAT/MBA Expert

User avatar
GMAT Instructor
Posts: 16207
Joined: Mon Dec 08, 2008 6:26 pm
Location: Vancouver, BC
Thanked: 5254 times
Followed by:1268 members
GMAT Score:770

by Brent@GMATPrepNow » Wed Jun 20, 2018 5:09 am
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
Image

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

by Vincen » Wed Jun 20, 2018 6:28 am
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>

User avatar
GMAT Instructor
Posts: 15539
Joined: Tue May 25, 2010 12:04 pm
Location: New York, NY
Thanked: 13060 times
Followed by:1906 members
GMAT Score:790

by GMATGuruNY » Wed Jun 20, 2018 7:05 am
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
Since 25% = 1/4 and 50% = 1/2, let C = the LCM of the two denominators = 4*2 = 8.
Since Ms. Jones sells the house for 25% above cost, her profit is equal to 1/4 of the cost:
(1/4)(8) = 2.
Since she must pay a tax equal to 50% of her profit, the tax = (1/2)(2) = 1.

Now plug C=8 into the answers to see which yields a tax of $1.
Only B works:
C/8 = 8/8 = 1.

The correct answer is B.
Private tutor exclusively for the GMAT and GRE, with over 20 years of experience.
Followed here and elsewhere by over 1900 test-takers.
I have worked with students based in the US, Australia, Taiwan, China, Tajikistan, Kuwait, Saudi Arabia -- a long list of countries.
My students have been admitted to HBS, CBS, Tuck, Yale, Stern, Fuqua -- a long list of top programs.

As a tutor, I don't simply teach you how I would approach problems.
I unlock the best way for YOU to solve problems.

For more information, please email me (Mitch Hunt) at [email protected].
Student Review #1
Student Review #2
Student Review #3

User avatar
Junior | Next Rank: 30 Posts
Posts: 15
Joined: Wed Jun 20, 2018 9:11 am
Location: Chicago, IL
GMAT Score:770

Question

by arosman » Wed Jun 20, 2018 9:40 am
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
Adam Rosman, MD
University of Chicago Booth School of Business, Class of 2020
[email protected]

Unlimited private GMAT Tutoring in Chicago for less than the cost a generic prep course. No tracking hours. No watching the clock.
https://www.alldaytestprep.com

GMAT/MBA Expert

User avatar
GMAT Instructor
Posts: 1462
Joined: Thu Apr 09, 2015 9:34 am
Location: New York, NY
Thanked: 39 times
Followed by:22 members

by Jeff@TargetTestPrep » Thu Jun 21, 2018 4:09 pm
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]

Image

See why Target Test Prep is rated 5 out of 5 stars on BEAT the GMAT. Read our reviews