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Apr 27, 2023

Question

easy

On January 1, 2009, the price of a certain stock was 20 percent less than its value on January 1, 2008. On January 1, 2010, the price of the stock was 25 percent less than its price on January 1, 2009. The price of the stock on January 1, 2010 is what percent of its price on January 1, 2008?

70 percent

60 percent

55 percent

50 percent

45 percent

Confirm your answer
PRESENTED BY :
Scott Woodbury-Stewart Founder and Expert GMAT Instructor

Solution:

Let s = the initial price of the stock on January 1, 2008. If the value of the stock falls 20 percent, then its price on January 1, 2009 will be

Final Value =(Initial Value)×(1Percent Less Than100)2009 Value=(s)×[1-(20100)]2009 Value=(s)×(80100)2009 Value=45s

If the value of the stock then drops an additional 25 percent, then its price on January 1, 2010 will be

Final Value =(Initial Value)×(1Percent Less Than100)2010 Value=(45s)×[1-(25100)]2010 Value=(45s)×(34)2010 Value=35s2010 Value=(35s×100)60% of s

The final price of the stock is 60 percent of its original price s.

Alternatively, we could let value of the stock on January 1, 2008 be $100. Then on January 1, 2009, the price of the stock would have been $80. On January 1, 2010, the price of the stock would have been $60. Thus 60100=610=60%.

Correct answer: B

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