Suppose that you have $12,000 in a rather risky investment recommended by your f

Question

Suppose that you have

$12,000 in a rather risky investment recommended by your financial advisor. During the first year, your investment decreases by50% of its original value. During the second year, your investment increases by 60% of its first-year value. Your advisor tells you that there must have been a 10% overall increase of your original $12,000 investment. Is your financial advisor using percentages properly? If not, what is your actual percent gain or loss of your original $12,000 investment?

Choose the right answer and provide percentage:

A. No, there is an actual percent loss of ___%

B. Yes, there is an actual percent loss of ___%

C. Yes, there is an actual percent gain of___%

D. No, there is an actual percent gain of ___%

Explanation / Answer

Decrease by 50% :-

12,000 - (0.5 * 12,000) = 6000

Increase by 60% :-

1.6 * 6000 = 9600

(9600/12000) *100 = 80%

100% - 80% = 20%

This is a decrease by 20%

So the answer is option is A.

No, there is an actual percent loss of 20%

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