Question
A share of stock loses 5% in value and then gains 5% . How does its ending value compare with its initial value?
Answers
PsyDAG
Ending value is slightly lower.
For example, $100 - 5% = $100 - $5 = $95
But 5% gain from $95 will not be as much.
For example, $100 - 5% = $100 - $5 = $95
But 5% gain from $95 will not be as much.
Reiny
x(.95)(1.05)/x
= .95(1.05) = .9975
It will be 99.75% of its initial value
= .95(1.05) = .9975
It will be 99.75% of its initial value