in terms of k and m

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sanju09: GMAT Instructor; Posts: 3650; Joined: Wed Jan 21, 2009 4:27 am; Location: India; Thanked: 267 times; Followed by:80 members; GMAT Score:760

in terms of k and m

by sanju09 » Fri Mar 18, 2011 2:20 am

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Last year the price per share of Stock X increased by k percent and the earnings per share of Stock X increased by m percent, where k is greater than m. By what percent did the ratio of price per share to earnings per share increase, in terms of k and m?
A. k/m
B. (k - m)
C. [100 (k - m)]/ (100 + k)
D. [100 (k - m)]/(100 + m)
E. [100 (k - m)]/ (100 + k + m)

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Source: Beat The GMAT — Problem Solving | Fri Mar 18, 2011 2:20 am

6983manish: Senior | Next Rank: 100 Posts; Posts: 65; Joined: Mon Mar 07, 2011 12:27 am; Thanked: 6 times

by 6983manish » Fri Mar 18, 2011 2:58 am

sanju09 wrote:Last year the price per share of Stock X increased by k percent and the earnings per share of Stock X increased by m percent, where k is greater than m. By what percent did the ratio of price per share to earnings per share increase, in terms of k and m?
A. k/m
B. (k - m)
C. [100 (k - m)]/ (100 + k)
D. [100 (k - m)]/(100 + m)
E. [100 (k - m)]/ (100 + k + m)

https://www.urch.com/forums/gmat-problem-solving

Let initial price of a share is "p"
After increase -> p(1 +k/100)
Let initial earning is "e"
After increase -> e(1 +m/100)

percentage rise in price/earning ratio =>

[[{p(1 +k/100)}/{e(1 +m/100)} - (p/e)] / (p/e)]*100

= [(100+k)/100+m) -1]*100
= [100*(k-m)]/(100+m)

Answer D.

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VivianKerr: GMAT Instructor; Posts: 1035; Joined: Fri Dec 17, 2010 11:13 am; Location: Los Angeles, CA; Thanked: 474 times; Followed by:365 members

by VivianKerr » Mon Mar 21, 2011 6:23 am

You could also pick numbers for this one.

If the original price per share of Stock X = 100
Let's say k = 20
New price per share = 120

Original earnings per share of Stock X = 100
Let's say m = 5 (since k > m)
New earnings per share = 105

Old ratio of price/earnings = 100/100 = 1
New ratio of price/earnings = 120/105 = approx 1.14

The percent increase is approx 14%.

Plug in our numbers into the answer choices, and look for the choice that also yields 14%:

A. k/m = 20/5 = 4 too small

B. (k - m) = 20 - 5 = 15 too big

C. 100 (15) / 100 + 20 = 1500 / 120 = 12.5 too small

D. 100 (15) / 100 + 5 = 1500/105 = approx 14. CORRECT!

E. 100 (15) / 100 + 20 + 5 = 1500/125 = 12

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by Brent@GMATPrepNow » Thu Jun 13, 2019 6:16 am

sanju09 wrote:Last year the price per share of Stock X increased by k percent and the earnings per share of Stock X increased by m percent, where k is greater than m. By what percent did the ratio of price per share to earnings per share increase, in terms of k and m?
A. k/m
B. (k - m)
C. [100 (k - m)]/ (100 + k)
D. [100 (k - m)]/(100 + m)
E. [100 (k - m)]/ (100 + k + m)

One approach is to plug in values.

Let $100 be the original price per share of Stock X
Choose a "nice" value for k. How about k = 200
So, after a 200% increase, the new price per share = $300

Let $100 be the original earnings per share of Stock X
Choose a "nice" value for m. How about m = 100
So, after a 100% increase, the new earnings per share = $200

Original ratio of price/earnings = $100/$100 = 1
New ratio of price/earnings = $300/$200 = 1.5

By what percent did the ratio of price per share to earnings per share increase?
So, the percent increase (from 1 to 1.5) is 50%.
In other words, when k = 200 and m = 100, the ratio increases 50%

Now, plug in 200 for k, and 100 for m, and look for the answer choice that also yields 50%.

A. k/m = 200/100 = 2 (nope)

B. (k - m) = 200 - 100 = 100 (nope)

C. [100(k - m)] / (100 + k) = 10,000/300 = 33.333 (nope)

D. [100(k - m)] / (100 + m) = 10,000/200 = 50 GREAT!

E. [100(k - m)] / (100 + k + m) = 10,000/400 = 25 (nope)

Answer: D

Cheers,
Brent

Brent Hanneson - Creator of GMATPrepNow.com

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by Scott@TargetTestPrep » Mon Jun 17, 2019 4:28 pm

sanju09 wrote:Last year the price per share of Stock X increased by k percent and the earnings per share of Stock X increased by m percent, where k is greater than m. By what percent did the ratio of price per share to earnings per share increase, in terms of k and m?
A. k/m
B. (k - m)
C. [100 (k - m)]/ (100 + k)
D. [100 (k - m)]/(100 + m)
E. [100 (k - m)]/ (100 + k + m)

Let the initial price per share be x and the initial earnings per share be y. After the increase, price per share became x(1 + k/100) and earnings per share became y(1 + m/100). The initial ratio of price per share to earnings per share was x/y and it became [x(1 + k/100)]/[y(1 + m/100)]. Let's apply the percent increase formula:

Percent increase = 100 * (new - old)/old

Percent increase = 100 * [[x(1 + k/100)]/[y(1 + m/100)] - x/y]/[x/y]

Let's factor out x/y from the numerator and cancel with the denominator:

Percent increase = 100 * [(1 + k/100)/(1 + m/100) - 1]

Percent increase = 100 * [[(100 + k)/100]/[(100 + m)/100]] - 1

Percent increase = 100 * [[(100 + k)/100] * [100/(100 + m)]] - 1

Percent increase = 100 * [(100 + k)/(100 + m) - (100 + m)/(100 + m)]

Percent increase = 100 * [(100 + k - 100 - m)/(100 + m)]

Percent increase = 100 * (k - m)/(100 + m)

Answer: D

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