The Wall Street Investor
An investor trading through a discount stock broker that charges $10.00 Dollars per transaction bought 200 shares of Vola Tile Corporation at $50.00 Dollars per share. The stock quickly increased in value by 50%, but then lost 40% of its value. The investor sold the stock. How much money did the investor gain or lose?
The cost of 200 shares at $50.00 Dollars each is $10,000.00 Dollars.
The 50% gain on $10,000 is $5,000, making the new total $15,000.00 Dollars.
The 40% loss on $15,000 is $6,000, reducing the total amount to $9,000.00 Dollars.
This is a $1000.00 Dollar loss, plus $10 Dollars for the Buy transaction, and $10 Dollars for the Sell transaction.
The investor lost a total of $1020.00 Dollars.
It seems counterintuitive that the investor should lose money when the percentage of the loss is less than the percentage of the gain. However, the percentage of the loss is calculated on a bigger amount than the percentage of the gain.
Im sorry but your answer is incorrect. Here is the real solution:
Cost of Shares = $10,000
Transaction amt = $10
Investment = $10,010
When calculating real-time dollars, you must include the $10 in your % of increase/decrease.
$10,010 + 50% = $15,015
$15,015 – 40% = $9,009
To sell the shares, you need to subract an additional $10 for transaction fees.
= $9.009 – $10 = $8,999
Actual Loss = $10,010 – $8,999 = $1,011
Dat investor got played homeboi. Rasdawg out \m/
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