Shares - Dividend

Expert replies

sankruth: Master | Next Rank: 500 Posts; Posts: 195; Joined: Sun Oct 21, 2007 4:33 am; Thanked: 10 times

by sankruth » Mon Jan 21, 2008 4:26 am

A person buys a share for $ 50 and sells it for $ 52 after a year. What is the total profit made by him from the share?
(I) A company pays annual dividend
(II) The rate of dividend is 25%

(A) Statement (I) ALONE is sufficient, but statement (II) alone is not sufficient
(B) Statement (II) ALONE is sufficient, but statement (I) is not sufficient
(C) BOTH statements TOGETHER are sufficient, but NEITHER statement alone is sufficient
(D) Each statement ALONE is sufficient
(E) Statements (I) and (II) TOGETHER are NOT sufficient

What is the OA? I chose E

Source: Beat The GMAT — Data Sufficiency | Mon Jan 21, 2008 4:26 am

camitava: Legendary Member; Posts: 645; Joined: Wed Sep 05, 2007 4:37 amFollowed by: 5 members; Location: India; Thanked: 34 times

by camitava » Mon Jan 21, 2008 5:28 am

sankruth, I will go for C. Because, in simple words, to calculate profit we have to know what is the price of the share after adding dividend. Stmt-1 is saying the dividend is annually and stmt-2 is saying the rate. So from both these two, we can calculate what price the share will be after adding the dividend. So we can calculate the profit then (if any)...

Correct me If I am wrong

Regards,

Amitava

simplyjat: Master | Next Rank: 500 Posts; Posts: 423; Joined: Thu Dec 27, 2007 1:29 amFollowed by: 2 members; Location: Hyderabad, India; Thanked: 36 times; GMAT Score:770

by simplyjat » Mon Jan 21, 2008 5:29 am

When you are holding shares of some company, you generally get dividend once a year. As the question is mentioning 1 year as the holding period, you need to know what dividend was paid by the company.

Hence the answer C

simplyjat

sankruth: Master | Next Rank: 500 Posts; Posts: 195; Joined: Sun Oct 21, 2007 4:33 am; Thanked: 10 times

by sankruth » Mon Jan 21, 2008 7:53 am

St 2 says 25% ... but my question is 25% of what? Since we dont know that, I chose E.

molsen: Newbie | Next Rank: 10 Posts; Posts: 2; Joined: Sat Oct 13, 2007 1:05 pm

by molsen » Mon Jan 28, 2008 2:03 pm

It would be 25% of $50.

But couldn't you argue that since (2) tells you the rate of dividend, you can infer that the dividend is paid? You wouldn't need (1) and the answer would be B?

Or can a dividend exist without being paid?

camitava: Legendary Member; Posts: 645; Joined: Wed Sep 05, 2007 4:37 amFollowed by: 5 members; Location: India; Thanked: 34 times

by camitava » Tue Jan 29, 2008 2:02 am

molsen wrote:It would be 25% of $50.

But couldn't you argue that since (2) tells you the rate of dividend, you can infer that the dividend is paid? You wouldn't need (1) and the answer would be B?

Or can a dividend exist without being paid?

Molsen, don't take it in other sense but are u not going too far? I mean to say - Is ur argument not going far from what has been mentioned in the Qs?

sankruth, to me, again I will say - the answer should be C. But u r now trying to pick every nook and corners [to me, it's not valid] of the qs!

Correct me If I am wrong

Regards,

Amitava

erjamit: Master | Next Rank: 500 Posts; Posts: 170; Joined: Mon Oct 22, 2007 4:36 am; Thanked: 7 times

by erjamit » Wed Jan 30, 2008 12:57 am

The answer should be E.

The dividend is 25%, but how do we know it is 25% of $50.
The question only says $50 is the buying price of the share.

camitava: Legendary Member; Posts: 645; Joined: Wed Sep 05, 2007 4:37 amFollowed by: 5 members; Location: India; Thanked: 34 times

by camitava » Wed Jan 30, 2008 1:00 am

Guys, I think this is the time when we can ask for Stuart's approach or explanation. Stuart request to u - can u pls confirm the answer of this Qs?

Correct me If I am wrong

Regards,

Amitava

gabriel: Legendary Member; Posts: 985; Joined: Wed Dec 20, 2006 11:07 amFollowed by: 1 member; Location: India; Thanked: 51 times

by gabriel » Wed Jan 30, 2008 5:27 am

Well, dividend is paid on the face value of the stock but nowhere does it say in the question that 50$ is the face value, so I am going to say E.

PS: - Guys please attach the source of the question.

sankruth: Master | Next Rank: 500 Posts; Posts: 195; Joined: Sun Oct 21, 2007 4:33 am; Thanked: 10 times

by sankruth » Wed Jan 30, 2008 8:05 am

gabriel wrote:Well, dividend is paid on the face value of the stock but nowhere does it say in the question that 50$ is the face value, so I am going to say E.

PS: - Guys please attach the source of the question.

This question is from a doc in BTG with about 100+ difficult quant questions.

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