Question

Suppose you invested $1500 in the stock market 2 years ago. During the first year, the value of the stock increased by 16%. During the second year, the value of the stock decreased by 16%. How much money is your investment worth at the end of the two-year period? (Note: The answer to this question is not $1500.)

Answer 1

$1,461.60

Explanation:

Value of the stock in the first year if value increased by 16% = 1500 x (1.16) = $1740

1.16 = 100% + 16% = 116%

Value of the stock in the second year if value decreased by 16% = $1740 x 0.84 = $1,461.60

0.84 = 100% - 16% = 84%