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Average returns

Expert replies
by r2kins » Fri Jul 01, 2011 10:37 pm
Over the last two years, who made more money investing in the stock market, Leslie or Kerri?
(1) Leslie made an average (arithmetic mean) return of 20%, and Kerri made an average (arithmetic mean) return of 5%.
(2) Kerri started with two times as much money as Leslie.
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Source: — Data Sufficiency |

by Target2009 » Fri Jul 01, 2011 11:09 pm
IMO : C. Together its sufficient to answer the question.
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by r2kins » Sat Jul 02, 2011 3:51 am
OA is E

guys!...some explanations pls!!
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by sunilrawat » Sat Jul 02, 2011 4:15 am
(1)
Leslie traded 5 times and Kerri traded 20 times.
But there is no info about total investment or successive returns.
Not sufficient

(2)
We get a ratio of their individual investments, but no info about successive returns to compare.
Not sufficient

combining,
successive returns are still not available.

Thus E

This is just a wild guess. I am looking forward to the exact explanation.
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by goalevan » Sat Jul 02, 2011 3:47 pm
Statement 1) Without information about the starting amounts, we cannot determine who made more money. Leslie could have started with $1,000,000 and Kerri with $1, or Leslie with $1 and Kerri with $1,000,000. These scenarios give different results in terms of the question stem. Insufficient.

Statement 2) Without information on the percentage return, the beginning amounts don't help us determine who made more money. Leslie could have a 1,000,000% return and Kerri a 1% return, or vice versa. Insufficient.

Combined) The key to this problem is that it deals with the two-year arithmetic average return. Think about what this means:

Let's take Kerri as an example. She has a 5% average return over the two years. It is possible that she had a 5% return both years, or that she had a 110% return one year, and a -100% return the following year. A negative 100% return would leave her with $0 at the end of year 2. The fact that we don't know the yearly returns makes the combined statements insufficient.

Another example of how these problems need to be read and interpreted very carefully!
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by r2kins » Sat Jul 02, 2011 6:00 pm
goalevan wrote:
Combined) The key to this problem is that it deals with the two-year arithmetic average return. Think about what this means:

Let's take Kerri as an example. She has a 5% average return over the two years. It is possible that she had a 5% return both years, or that she had a 110% return one year, and a -100% return the following year. A negative 100% return would leave her with $0 at the end of year 2. The fact that we don't know the yearly returns makes the combined statements insufficient.

Another example of how these problems need to be read and interpreted very carefully!
That's a good observation and the right answer, E!
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