Last Updated on May 3, 2023
GMAT OFFICIAL GUIDE PS
Solution:
To start, we need to create a few variables.
p = price per share of stock X
e = earnings per share of stock X
We are given that the price per share of stock X increases by k percent. We can express this as:
p(1 + k/100) = p((100 + k)/100)
We are also given that the earnings per share of stock X increased by m percent. We can express this as:
e(1 + m/100) = e((100 + m)/100)
Finally, we are asked by what ratio the price per share to earnings per share increased. This means that from last year to this year there was an increase. So first we can set up our two ratios and then plug those into the percent change formula. While the math that is produced here may seem a bit complicated, it is not too bad as long as we take our time and stay focused.
Answer: D
