gmat_perfect wrote:The company announced that its profits declined much less in the second quarter than analysts had expected it to and its business will improve in the second half of the year.

(A) had expected it to and its business will improve

(B) had expected and that its business would improve

(C) expected it would and that it will improve its business

(D) expected them to and its business would improve

(E) expected and that it will have improved its business

Two concepts tested:
1>use of present perfect: to convey the sequence of 2 past actions.

In this eg: 'had' conveys that company had expected before it had announced.

2>and activity of past that predicts future, require 'would' and not will. If the announcement is still going on then 'will' is correct. This concept is also called as "futuristic past" and require 'would'

Hence Ans should be B. hope thats OA?

This GMATPrep question tests your ability to recognize and correct verb tense. The expectation of analysts happened in the past, prior to another past action (before profits declined). Therefore to expect must be in the past perfect: "analysts had expected". This leaves us with A/B

2 things wrong with A:

1) parallel structures.
A says "company announced THAT its profits had declined..and its business will improve".
B says "company announced THAT its profits had declined...and THAT its business would improve."
Repeating THAT improves the parallel structure.

2) When a prediction is made in the present, what is predicted will happen in the future. "I predict that my team will win". When a prediction was made in the past, what was predicted would happen: "I predicted that my team would win". In this case "will improve" should be "would improved" because the announcement (prediction) of the impending improvement was made in the past.

Correct: I announce that you will improve.
Correct: I announced that you would improve.

Incorrect: I announced that you will improve.
Incorrect: I announce that you would improve.

B is correct. For a much more detailed discussion of the issues tested have a look at GMATPrep question 2414. To practice similar questions in a timed environment, set topic='Verb Tense AND Parallelism' and difficulty='500-600'

Good luck,
-Patrick