What is the investor's profit at the end of the week in the following case:An investor bought a stock for $4 on Monday. The next day the price dropped 15%. It increased over the rest of the week at...

What is the investor's profit at the end of the week in the following case:

An investor bought a stock for $4 on Monday. The next day the price dropped 15%. It increased over the rest of the week at 5% per day.

Asked on by cesther86

2 Answers | Add Yours

justaguide's profile pic

justaguide | College Teacher | (Level 2) Distinguished Educator

Posted on

The price of the stock on Monday when they were bought is $4. It crashes by 15% on Tuesday to reach $4*(1 – 15%) = $4*0.85.

The price recovers by 5% over the rest of the week. For three days the price rises 5% everyday so the price at the end of the week is:

$4*0.85*(1.05)^3 = $3.93

For the original price of $4 at which the stock was bought the price at the end of the week is $3.93.The investor’s loss is (4 – 3.93)*100/4 = 1.75%

Therefore the investor has not made a profit but a loss of 1.75%

cesther86's profile pic

cesther86 | Student | (Level 1) Honors

Posted on

These little things we have to keep in mind. The stock market is open only 5 days in a week, Saturday and Sunday are a holiday. No wonder my answer was not matching the one in the book. Considering a rise for only three days I get the right answer.

We’ve answered 318,957 questions. We can answer yours, too.

Ask a question