Douglas & Reynolds, an American financial firm, has recently fallen on

QUESTION

Douglas & Reynolds, an American financial firm, has recently fallen on hard times. Its CEO notes that the firm has lost money for three straight years.

Over the same period, the euro has lost 15 percent of its value while the Chinese yuan has increased its value by 15 percent. He, therefore, concludes that the company should discontinue its foreign currency investments in the euro in favor of the yuan in order to increase its profits. Which of the following, if true, most weakens the CEO’s argument?
A) Over the last ten years, investments in the yuan have only marginally outperformed investments in the euro.
B) Research shows that a vast majority of American voters approve of European governments and disapprove of the Chinese government.
C) The amount of capital the company currently has invested in the euro is significantly larger than the amount invested in the yuan.
D) In the past six months, Europe has shown signs of recovering from a financial crisis while China has shown signs of entering one.
E) A competing firm recorded record profits after shifting its investments from Japanese yen to U.S. dollars.

ANSWER

Answer: D
Explanation: D) Since the CEO bases his argument on trends from the past three years, new information suggesting that earlier trends may no longer apply to the current economic environment weakens his argument. Choice A slightly strengthens the CEO’s argument, as it suggests that the yuan has been a better investment over the long term, albeit only a slightly better one. It’s not known whether American public approval of foreign governments, Choice B, will affect the company’s determination to increase its profits. Choice C is irrelevant, as the relative amounts of money currently invested do not have an impact on future investment strategies. Choice E is only tangentially related to the CEO’s argument, as it is unreasonable to assume that the mere act of shifting investments between markets will always cause similar profit increases or that what works for a competing firm will also work for Douglas & Reynolds.