Source: Official Guide for the GMAT 13th Ed. Problem Solving; #177 Official Guide for the GMAT 2015 14th Ed. Problem Solving; #177

4

Last year the price per share of

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?

2 Explanations

1

Jonathan Wong

Why did Mike say (add 1 to it to get a multiplier) and then you see he makes writes (1 + k/100)?

What does (add 1 to it to get a multiplier) mean?

Aug 31, 2015 • Comment

Sam Kinsman, Magoosh Tutor

Hi Jonathan, this is something we do when we have a percent increase and we want to find the new total value. We express a percentage as a fraction (x/100), add 1 to it, and multiply this by the original amount to find the new amount.

The best way to explain this is using an example. Let's say that the price per share of a stock is $50. The price increases by 10%, and we want to find the new price. 10% is 10/100, or 1/10. But if we multiply $50 by 1/10, we won't get the new price - we'll only get the increase in price (which is $5). Instead, to find the new price, we can add 1 to the fraction: 1 + 1/10. Now we have a multiplier, which we can use to get the new price: (1 + 1/10) * $50 = $55.

We have a blog post that explains this method - I'd suggest you take a look at it! Here it is: http://magoosh.com/gmat/2012/understanding-percents-on-the-gmat/

Oct 9, 2015 • Reply

5

Gravatar Mike McGarry, Magoosh Tutor

Dec 28, 2013 • Comment

Allan Carlo Ramos

Hi,

I just want to ask.... why does this gmat question have where K > M statement? Does it add value / meaning to the problem being solved. From what I have experienced usually GMAT problems all known givens or statements will be needed to solve the problem

Apr 4, 2016 • Reply

Sam Kinsman, Magoosh Tutor

Hi Allan, you're right that we don't need to know that K > M in order to solve this problem. You're also right that most of the time, you need to use all the information that's given in order to solve the problem. However, that's not always the case, and this problem is an example of that :)

Apr 23, 2016 • Reply

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