A person purchases stocks of two companies in 2009. One has an annual return of 2.5 percent and the other's return is 3 percent. The difference between the dollar returns on the two company stocks would be the greatest in:
A) 2010.
B) 2012.
C) 2013.
D) None of these is correct: The difference in dollar returns is always the same.

Question

Quizplus · Accepted Answer

The difference in dollar returns will be greatest in the year when both stocks have the highest value. Since the returns are given as percentages, we can assume that the initial investment is $100. 
In 2009, the investments are $100 in each company. 
In 2010, the investment in the first company has a value of $102.50 and the investment in the second company has a value of $103. The difference in dollar return is $0.50. 
In 2011, the investments are $105.063 and $106.09 respectively. The difference in dollar return is $1.027. 
In 2012, the investments are $107.701 and $109.27 respectively. The difference in dollar return is $1.569. 
In 2013, the investments are $110.467 and $112.097 respectively. The difference in dollar return is $1.63. 
Therefore, the greatest difference in dollar return is in 2013, making choice C the correct answer.

A Person Purchases Stocks of Two Companies in 2009