Problema Solution
Suppose that you have $10,000 in a rather risky investment recommended by your financial adviser. During the first year, your investment decreases by 30% of its original value. During the 2nd year, your investment increases by 40% of its first year value. Your adviser tells you that there must have been a 10% overall increase of your original $10,000 investment. Is your financial adviser using percentages properly? If not, what is your actual percent gain or loss of your original $10000 investment?
Answer provided by our tutors
you start with: $10,000
first year there is decrease by 30%: 10,000 - 0.30*10,000 = (1 - 0.30)*10,000 = 0.70*10,000
second year increase by 40% on first year value: 0.70*10,000 + 0.40*0.70*10,000 = (1 + 0.40*0.70)*10,000 = 1.28*10000
the overall increase is: 1.28*10,000 - 10,000 = 0.28*10,000 or 28%
the financial adviser is not using percentage properly.
the actual percent gain of your original $10000 investment is 28%.