A real estate investment firm began the year with 80% of its

A real estate investment firm began the year with 80% of its investments in commercial real estate and 20% in residential real estate. Over the course of the year, the total value of its investments increased by 3.5%, with the value of its commercial real estate holdings growing by 7%. This means that the value of its residential real estate holdings:

A. Did not change
B. Decreased by 14%
C. Decreased by 10.5%
D. Decreased by 3.5%
E. Increased by 1.5%

OA C

Source: Veritas Prep

Quote

GMAT/MBA Expert

Scott@TargetTestPrep: GMAT Instructor; Posts: 7243; Joined: Sat Apr 25, 2015 10:56 am; Location: Los Angeles, CA; Thanked: 43 times; Followed by:29 members

by Scott@TargetTestPrep » Sat Jun 01, 2019 5:24 am

BTGmoderatorDC wrote:A real estate investment firm began the year with 80% of its investments in commercial real estate and 20% in residential real estate. Over the course of the year, the total value of its investments increased by 3.5%, with the value of its commercial real estate holdings growing by 7%. This means that the value of its residential real estate holdings:

A. Did not change
B. Decreased by 14%
C. Decreased by 10.5%
D. Decreased by 3.5%
E. Increased by 1.5%

OA C

Source: Veritas Prep

We are given that a real estate investment firm began the year with 80% of its investments in commercial real estate and 20% in residential real estate. If we let the total investments = 1000, then 0.8 x 1000 = 800 = commercial real estate and 0.2 x 1000 = 200 = residential real estate.

We are also given that the total investments increased by 3.5% and that commercial real estate investments increased by 7%. We need to determine the change in percentage for residential real estate investments.

We can let n be the change in percentage and create the following equation:

1.07(800) + (1+n/100)(200) = 1.035(1000)

856 + 200 + 2n = 1035

1056 + 2n = 1035

2n = -21

n = -10.5

Since n is negative, the value of investments in residential real estate decreased by 10.5 percent.

Answer: C

Scott Woodbury-Stewart
Founder and CEO
[email protected]

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

Quote

swerve: Legendary Member; Posts: 2226; Joined: Sun Oct 29, 2017 2:04 pm; Followed by:6 members

by swerve » Sun Jun 02, 2019 6:46 am

$80+20=100$
In a year
$80\cdot 1,07 + ? =100\cdot 3,5$
cca. $86 + ? = 103,5$
$?=17,5$

$\frac{17,5-20}{20}= -\frac{2,5}{20} \Rightarrow$ cca $12\% < 14\% \Rightarrow $ __C__

Quote

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

by deloitte247 » Fri Jun 07, 2019 11:29 pm

Let overall investment = 100 %
Investment increase by 3.5%
Investment = 100 + 3.5 = 103.5%
Commercial Investment = 80 %
Commercial Investment increase by 7%
7% of 80 = 5.6
Residential real estate = 20%
Changes in Residential real Estate = 3.5 - 5.6 = -2.1
$$-\frac{2.1}{20\%}=-0.105\%$$
Since the % change is negative, then the value of investment in residential real estate decreased by 10.5.

$$Answer\ is\ Option\ C$$

Quote

GMATGuruNY: 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 » Sun Jun 09, 2019 3:49 am

BTGmoderatorDC wrote:A real estate investment firm began the year with 80% of its investments in commercial real estate and 20% in residential real estate. Over the course of the year, the total value of its investments increased by 3.5%, with the value of its commercial real estate holdings growing by 7%. This means that the value of its residential real estate holdings:

A. Did not change
B. Decreased by 14%
C. Decreased by 10.5%
D. Decreased by 3.5%
E. Increased by 1.5%

Let the total investment = $1000, implying that commercial holdings = 80% of 1000 = $800 and that residential holdings = 1000-800 = $200.

Since the total $1000 investment grows by 3.5%, the total growth = 3.5% of 1000 = $35.
Since the $800 in commercial holdings grows by 7%, the growth in commercial holdings = 7% of 800 = $56.

Change for residential holdings = (total growth) - (commercial growth) = 35-56 = -$21.
Since the $200 in residential holdings suffers a $21 loss, we get:
Percent decrease = decrease/original * 100 = 21/200 * 100 = 10.5%.

The correct answer is C.

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

Quote

Post new topic Post Reply

• Page 1 of 1

5/5

5 Star (473 Reviews)

"Target Test Prep is the closest to the official version of the GMAT exam, about 99% accuracy in terms of the quality and quantity of information. The course has excellently created singular sets of focused lessons and tests for every possible topic that one could come across in the official GMAT exam."

"The TTP course maximizes the efficiency of the time you spend studying. It will take time and effort but I could almost guarantee that if you complete the course exactly as it is laid out you will get an amazing score. They also have a very responsive team willing to help with any questions you might have."

"TTP has two things that I think no other test prep company offers: A teaching approach that reinforces understanding and an attitude that will give you the mental preparedness needed to succeed on the test. TTP gives you a deep understanding of the concept you need to know while teaching you how to think."

Write a Review